Financial Accounting Report: Transactions, Statements, and Standards

This financial accounting report covers recording business transactions using double-entry bookkeeping, preparing final accounts, and performing reconciliations. It discusses various business transactions, single and double-entry systems, and trial balances. Scenario 1 includes journal entries, ledger accounts, and a trial balance. It also differentiates between financial statements and reporting, explains fundamental accounting principles like accrual, conservatism, cost, full disclosure, and going concern. Scenario 2 involves bank reconciliation statements and control accounts. The report emphasizes the importance of accurate financial records for effective decision-making and competitive advantage.

FINANCIAL ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
SCENARIO 1..............................................................................................................................................3
Question 1...............................................................................................................................................3
Question 2...............................................................................................................................................4
Question 3.............................................................................................................................................11
Question 4.............................................................................................................................................12
Question 5.............................................................................................................................................14
Question 6.............................................................................................................................................16
Question 7.............................................................................................................................................18
SCENARIO 2............................................................................................................................................19
Question 1.............................................................................................................................................19
Question 2.............................................................................................................................................20
Question 3.............................................................................................................................................21
Question 4.............................................................................................................................................21
Question 5.............................................................................................................................................23
CONCLUSION.........................................................................................................................................25
REFERENCES..........................................................................................................................................27

INTRODUCTION
Financial Accounting (FA) is process of recording, summarizing and analyzing the
monetary transactions in order to have efficient decision making procedure. In the current
scenario, there is crucial requirement to gain competitive advantages through developing
systematic procedure for having effectual practices in industry to lead the company from similar
organization. The current report will include the description regarding business transactions,
double and single entry system, trail balance, difference between financial statement and
reporting, fundamental principles of accounting, etc. the practical exposure will be given by
preparing journal ledge, profit & loss account, cash flow and reconciliation statement, etc
MAIN BODY
SCENARIO 1
Question 1
Business transaction is related with interchanging goods and services between two or
more parties for the purpose accomplishing organizational goals such as profitability, higher
conversion rate, etc. There are several types of business transactions which are undertaken by
firms in industry in order to derive sufficient accomplishment of objectives. There are several
types of business transactions which are performed in form of cash and credit for the purpose of
purchasing & selling of raw materials, current and fixed assets and paying off debts, salaries,
interest, dividends, etc. In addition to this, these all practices are exerted for exchange of value.
It is measurable in terms of money which highly impacts the financial position of organization.
There are several events which can be referred as commercial transactions as they do not have
the characteristics like affecting financial position, monetary value, etc.
Single entry is the characterized by the fact that there is only one side recording of
transaction. It does not enable the firm to have effective understanding of particular transaction
to make appropriate decision making (Roberts, J., 2021). It does not associated with the formal
training and utilized by the small businesses to make the process of carrying forward activities
in comparatively easy manner due to characteristics of simplicity and cost effectiveness. In book

system double entry system is where entry to an account needs corresponding entry to different
head. This type of system has the equal and corresponding sides known as debit & credit. It
standardize the process and maintain the accuracy of through improving efficiency via providing
reliable information by preparing financial statements. It helps in reducing errors and omission
in respect to derive sufficient ability to decline the possibility of inaccurate decisions that can
influence business procedure.
Trial Balance is a basically a worksheet that is concerned to provide information through
summarizing ledger balances. The common purpose for formulating trail balance is to ensure
entries in mathematically manner are correct. Firm get the base for preparing financial statements
through identifying and improving errors at initial stage by giving emphasis on trail balance. The
validity of accuracy of trial balance is ensured by focusing on its both debit and debit side
through assuring that these are equal (Blaufus and Hoffmann, –2020). There are several purposes
for which company prepares this so that various benefits can be obtained. The significant which
organizations get through executing trial balance includes arithmetic accuracy, preparation of
financial statements, rectifying errors, making adjustments, comparatively analysis, effective
decision am king via formulating audit reports, etc
Question 2
1. Journal Entries for the month of June 2016
Date Particulars L.F Debit Credit
1-Jun Cash A/C Dr. 65000
To Capital A/C 65000
(Being capital invested for
starting company)
2-Jun Purchase A/C Dr. 8000
To Trade payables A/C 8000
(Being goods purchased on
credit)

7-Jun Cash A/C Dr. 4000
To Sales A/C 4000
(Being goods sold for cash)
8-Jun
Trade payables A/C
Dr. 4000
To Bank A/C 4000
(Being cheque issued to pay
creditors)
14-Jun
Prepaid Insurance A/C
Dr. 75
To Bank A/C 75
(Being prepaid insurance
expenses paid )
15-Jun
Trade receivables A/C
Dr. 12000
To Sales A/C 12000
(Being goods sold on credit)
16-Jun Purchase A/C Dr. 10000
To Trade payables A/C 10000
(Being goods purchased on
credit)
18-Jun
Computer Equipment A/C
Dr. 300
To Cash A/C 300
(Being computer equipment

purchased by paying in
cash)
20-Jun Prepaid rent A/C Dr. 150
To Bank A/C 150
(Being prepaid rent paid )
21-Jun Cash A/C Dr. 10000
To Sales A/C 10000
(Being goods sold for cash)
25-Jun Cash A/C Dr. 100
To Bank A/C 100
(Being amount withdrawn
from bank for keeping it into
petty cash)
30-Jun Stationary A/C Dr. 30
To Cash A/C 30
(Being stationary purchased
for taking money from petty
cash)
2. Ledger accounts
Capital A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
30-Jun To balance c/d 65000 1-Jun
By Cash
A/c 65000
65000 65000

Purchase A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
2-Jun To trade payables A/c 8000
16-Jun To trade payables A/c 10000 30-Jun
By balance
c/d 18000
18000 18000
Bank A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
8-jun
By Trade
payables
A/c 4000
14-Jun
By prepaid
insurance
A/c 75
20-Jun
By prepaid
rent A/c 150
30-Jun To balance c/d 4325 25-Jun
By Cash
A/c 100
4325 4325

Trade receivables A/C
Date Particulars J.F. Amount Date Particulars J.F. Amount
15-Jun To Sales A/c 12000 30-Jun
By balance
c/d 12000
12000 12000
Cash A/C
Date Particulars J.F. Amount Date Particulars J.F. Amount
1-Jun To Capital A/C 65000 18-Jun
By Computer
Equipment A/C
Dr. 300
7-Jun To Sales A/C 4000
21-Jun To Sales A/C 10000 30-Jun By Stationary A/C 30
25-Jun To Bank A/C 100 30-Jun By balance c/d 78770
79100 79100
Trade payables A/C
Date Particulars J.F. Amount Date Particulars J.F. Amount
8-Jun To Bank A/c 4000 2-Jun
By Purchase
A/c 8000
30-Jun To balance c/d 14000 16-Jun
By Purchase
A/c 10000

18000 18000
Sales A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
7-Jun
By Cash
A/c 4000
15-Jun
By trade
receivables
A/c 12000
30-Jun To balance c/d 26000 21-Jun
By Cash
A/c 10000
26000 26000
Computer Equipment A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
18-Jun To Cash A/c 300 30-Jun
By balance
c/d 300
300 300

Prepaid Rent A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
20-Jun To Bank A/c 150 30-Jun
By balance
c/d 150
150 150
Stationary A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
30-Jun To Cash A/c 30 30-Jun
By balance
c/d 30
30 30
Prepaid insurance A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
14-Jun To Bank A/c 75 30-Jun
By balance
c/d 75
75 75
3 Trial Balance:
Particulars Debit Credit
Cash A/c 78770

Sales A/c 26000
Bank A/c 4325
Capital A/c 65000
Purchase A/c 18000
Trade payables A/c 14000
Stationary account 30
Prepaid Insurance A/c 75
Prepaid Rent A/c 150
Trade receivables A/c 12000
Computer Equipment A/c 300
Total 109325 109325
Question 3
Financial statements and reports are widely used as interchangeably for meeting the variety of
business objectives. Financial Reporting (FR) comprises the statements like income, cash flow
statement, balance sheet, etc. the purpose of FR are to formulate the structure of communication
so that essential and reliable information can be provided to stakeholders. FRs are widely
prepared on the quarterly and annually basis to overcome its legal obligations. Financial
Statement (FS) is formulated to give information regarding company’s current position to several
stakeholders. The reason behind creating FS to make management of organization to have
sufficient understandability of company’s current position (Amadi and Ejiogu, 2021). It assist
company to attain ability to make reliable improvements through rectifying errors and lacking
areas on appropriate time which helps in gaining competitive advantages in industry. Evaluation
of profitability can be recognized by income statement so that decisions regarding cost
associated with generating profits can be identified. Cash flow and balance sheet play role of
giving insights about liquidity condition in market in turn efficiency of carrying forward
practices can be known.

Financial reporting is used to provide data for the purpose of decision making whereas
statements are means of communicating information regarding monetary condition, stability, etc.
there are several types of stakeholders who are interested in utilizing the information provided in
order to have effective decision making (Filusch, 2021). The stakeholders are comprises
employees, owners, suppliers, investors, financial institutions, analyst, banks, competitors, etc
that are related to either internal or external business environment. The main purpose of investor
is to utilized given information is to have ability to formulate effective decision making.
Company requires giving reliable, relevant, timeliness and other type of qualitative
characteristics in its reports and statements so that trustworthiness in industry can be achieved.
This form of features helps inventors, suppliers, lender, etc to be confident about company’s
process and make valid decisions (Weygandt, Kimmel, and Kieso, 2018). Lenders, suppliers, etc
largely focus on the liquid position so that can get assurance of easily obtaining of their provided
funds. Organization requires maintaining appropriate and timely information providing system
with help of these reports. Internal as well external stakeholders become able to compare current
performance with previous so that potential growth of company to fulfill motive of higher
profitability can be assessed. Management of firm can determine needed improvements through
identifying lacking areas in turn respective course of action for achieving improvement can done.
Competitors of industry as well concentrate on financial information of similar organization to
assess data about competitive advantages like pricing strategy, differentiation, etc can be known
to make suitable action for getting success in sector.
Question 4
Accounting principles are the rules which helps firm to get guidance in form of having smooth
functioning through maintain appropriate balance in its business practices. Different fundaments
principles of accounting are important for all types of entities irrespective of their scale of
operation.
Accrual Principle
It is associated with recording the business transactions in accounting period in which it
has took place. This particular principle is basically concerned with making the procedure of
recording, analyzing and controlling financial information in effectual manner. In addition to
this, it is significant for the company to evaluate accurate condition of company in industry in

terms of liquidity through enabling it to get sufficient and reliable sources of data in order to
formulate effectual decision making (Schroeder, Clark and Cathey, 2019). This is essential fro
firm to implement to get cash flows information so that potential course of practices can be
exerted effectively.
Conservatism Principle
This states that expenses and losses should be recorded soon for avoiding situation of inability to
handle to move towards success. It as well concerned with ensuring that firm to take profits and
revenue only when it actually occurs. Conservatism principle introduces slant to FS that may
yield lower reported profits, since revenue & assets identified delayed which motivates re cope
up of losses earlier rather than later.
Cost Principle
There are various rules that provide guidance in form of having corrective method for
assessing true value of firm in terms of liquidity. This specific principles states that organizations
should record ist assets, liabilities, etc at the value on which company has bought it rather than
changing according to market current trends. In addition to this, it is contrast to the accountings
standards of making adjustments in assets and liabilities to current value.
Full disclosure principle
This is related to the making sufficient and reliable information to those persons who are
interested in judging the financial health of organization. It is important for company to maintain
that accuracy, reliability, etc while making assure that all relatable sources of data are provided
to concerned people who have interest in firm (What is financial accounting? 2021). It becomes
essential for company to have appropriate channel that can give corrective information to
stakeholders in turn they can formulate strategic decision. Organization should provide data
regarding past, current and potential information with including all financial and non monetary
aspects.
Going concern principle

This concept articulate that organization will continue its operational practices for longer
time. It assures that company will meet its financial obligations without threat of liquidation in
turn to accomplish business objectives in effective pattern. It helps company in to give
assurance through building the trustworthiness in industry. With respect to this, firm should
maintain the scenario through enabling stakeholders to have proper base to make strategic
decisions.
Matching principle
It articulates that company should record all expenses while taking profit into account.
This is cornerstone of the accrual basis of accounting which is purely concerned with cause and
effect relationship between revenue and expenses. It provides benefits like equal distribution,
accurate reporting, greater sense of the company’s profitability, etc.
Materiality Principle
Accounting Standards can be ignored if there is not so much impact on the factors
influencing the success of organization is called materiality principles. It should be implemented
into company’s process to have appropriate smooth functioning.
Revenue reorganization principle
Revenue recognition principle that one should one should only record earnings in its
booking system not when the cash is collected. There is requirement of these principles to have
effectual understanding of their ability to meet potential and current obligations.
Question 5
Income Statement
Particulars Amount £ Amount £
Sales (Revenue) 900000
Opening inventory 12000

Add: Purchases 700000
Less
:
Closing inventory 14000
Cost of goods sold 698000
Gross profit 202000
Less
:
Advertising 10000
Salaries 50000
Electricity 10000
Telephone 9000
General expenses 1200
Net profit 121800
Statement of financial position
Particulars Amount £
Assets
Fixed assets
Land and Building 400000
Plant and Machinery 30000
Vehicles 22000
Current assets
Inventory 14000
Receivables 110000
Total assets 576000
Liabilities
Current liabilities

Bank overdraft 20000
Payables 80000
Shareholder's equity
Capital 354200
Profit 121800
Total liabilities 576000
Question 6
Profit and loss account for the year ended 31 December 2017
Particulars Amoun
t £
Amount
£
Sales 125000
Less: Sales return 1000 124000
Opening inventory 9500
Purchase 75000
Less: Purchase return 1500
Less: Closing inventory 1000
Less: Cost of goods sold 82000
Gross profit 42000
Less: Wages and salaries 13200
Rent and rates 1840
Postage 900
Insurance 7089
Bad debts 550
Provision for bad debts 934
Depreciation 5000
Add: Interest received 1000

Rent received 4360
Net profit 17847
Balance sheet as on the year ended 31 December 2017:
Assets
Bank 10594
Cash 340
Debtors 12500
Motor Vehicle 25000
Less: Accumulated depreciation (5000+5400) 10400
Closing Inventory 1000
Prepaid Insurance 411
Loan given 100000
Total assets 139445
Liabilities
Capital 120800
Less: Drawings 5150
Add: Profit 17847
Creditors 3900
Provision for bad debts 934
Outstanding rates 340
Advance rent received 490
Allowance for bad debts 284
Total liabilities 139445

Question 7
Cash Flow statement is responsible for giving information regarding in and out flows of
monetary and liquid resources for deriving deep insights about the entity. It is widely prepared
by business regardless of their scale of operation so that urgent requirement of funds can be
identified. To meet this type of unforeseen circumstances company can take steps at initial stage
in order to obtain good financial health (Garbowski and et.al., 2019). It reduces the risk of
failure by giving depth level data through segregating cash flow statement in three parts. It
comprises operating, financing and investing which enable firm to identify its [potential
opportunity and threat to take suitable action. Drafting the Cash flow statement of Tesco as
follows:

SCENARIO 2
Question 1
Bank Reconciliation Statement (BRS) is responsible for presenting summary of bank account of
company long with its financial details. It is one of the useful techniques utilized by businesses
to reduce fraud and errors practices. The main purpose behind implementing bank reconciliation
statement is to have sufficient capability to check errors prevailing in recording of business
transactions. There are several purposes for which it formulated BRS on periodically basis to

detect mistakes to enhance possibilities of making larger improvements in order to desirable
position.
In respect to prepare this fir compares opening balances of both the bank columns of cash
book along with bank statement. Firm compares credits side of bank statement with debit side of
its specific column of cash book. Analyzing entries of both to assess mistakes and omission of
transaction so that suitable adjustment can be made. Making adjustments and obtaining
corrective figures at the end to formulate crucial decision making (Kimmel, Weygandt and
Kieso, 2018). There are several benefits of executing this in systematic procedure which includes
detecting errors like missed or doubled payment. In addition to this, tracking the applicable
interest and fees that need to be pay off in specific period which aids user to avoid situation of
awkwardness. Firm become able to track the possible receivables for efficient structuring of
BRS. It becomes necessary for entity to prepare and maintain BRS for getting efficiency in
removing lacking areas that are hindering financial of organization. It enable firm to recognize
internal frauds prevailing in organization by employees through giving emphasis on workers
practices. These are reasons for which firm take the BRS into organizational process.
Question 2
Control Account (CA) is summary provider statement in general ledger which comprises
aggregate totals for the transaction that is individually recorded in subsidiary account. It is
largely focused to give emphasis on the account receivables and payables which are responsible
for containing large number of commercial transactions (Lee, 2020). This is used on daily basis
for the maintaining clarity of transactions by ensuring that general ledger is clean of details
through comprising corrective balances. The subsidiary account permits to track within
mentioned head for further details. Individual transactions appear in both account but CA
includes only closing balances. This ending balances must match with the closing total of
subsidiary ledger for smooth functioning. There are variety of advantages that control account
provides to business for taking it into practice.
CA play significant role in financial management through enabling business to have
sufficient understanding of prevailing scenarios. The main purpose of implementing CA into
organizational activities is to derive the ability to make accuracy of subsidiary ledger account by
checking each individual account. Formulation of business policy, structure with help of data

given by this head is very useful. There is possibility that firm can attain specialization due to
division of work by control account. Prompt preparation of profit & loss account and balances
become possible by having CA in company practices. Efficient evaluation of internal procedure
to recognize extent of accuracy can be ascertained with help of control account in financial
management.
Question 3
Suspense Account (SA) is holding head in which firm records those transactions who are
in questionable state due to their inappropriate knowledge regarding their categorizing head. It
aids enterprise to gather detailed information about uncategorized head which enable it to have
enough time in turn corrective placement can be exerted (What is suspense account? 2021). It is
crucial to have proper recording of transactions in their designated account as it gives wider
opportunity to reduce risk of failing due to inaccurate determination of financial health.
The reason behind drafting suspense account is to keep accounting system organized to
have systematic processing (Ramachandran and Kakani, 2020). Firm becomes able to get the
sustainability in industry when it has corrective approach regarding its way of treating financial
information as it highly influence further activities like formulation of trial balance, profit and
loss account, financial statement, etc. There are some cases which requires firm to indulge into
creation of SA which involves preparation of trial balance, receiving partial payments, doubts in
adhering financial obligations, etc It all gives adverse impact on current liquidity position of
enterprise so it becomes essential to prepare SA.
Question 4
Revised Cash book as per the bank column
Particulars J.F.
Amount
£ Particulars J.F.
Amount
£
To balance b/d 1760
By Insurance
account 170
To D. Park A/c 270
By Talk Talk
bill 56
To Mr. Patel A/c 1070 By Arif 186

account
To Abbey A/c 325
By bank
charges 25
To Drawings A/c 105 By balance c/d 3093
Bank Reconciliation Statement as on 28th February 2010:
Particulars Amount
Balance as per the pass
book
3093
Add: Insurance claim 170
Talk Talk bill 56
Cheque received but not
credited
186
Bank charges 25
Less:
Cheque issued but not
presented for payment
270
Transfer to bank directly 1070
Dividend received by
Abbey bank
325
Drawings not recorded 105
Balance as per Cash book 1760
Direct Debit
It is withdrawal of funds from the another account to carry forward financial transaction.
Standing Orders
It is related with giving instructions to bank to pay set account at regular intervals to
another’s A/c.
Bank Charges

This involves the fees & charges imposed by bank on account holder for utilizing its
services.
Dis-honor cheque
It is result of insufficient funds, mismatch of signature, etc.
Question 5
a) Journal entries
Particulars
L.F
. Debit Credit
1 Purchase A/C Dr. 2000
To A. Musa A/C 2000
(Being the goods purchased
on credit)
2 Cash A/C Dr. 1340
To Bank A/C 670
To SuspenseA/C 670
(Being the entry wrongly
entered twice in the cash
book)
3 G. Tahir A/C Dr.s 650
To Suspense A/C 650

(Being the entry not made in
the G. Tahir account)
4 Electricity bill A/C Dr. 790
To Suspense A/C 790
(Being the electricity bill
account forgotten to be
debited)
5
Motor vehicle expense A/C
Dr. 500
To Motor vehicle A/C 500
(Being the motor vehicle
expense wrongly capitalized
to the motor vehicle
account)
6 Sales A/C Dr. 270
To Suspense A/C 270
(Being the sales account
overcast by 270)
7 L. Samantha A/C Dr. 380
To Cash A/C 190
To Discount received A/C 190

(Being the entry wrongly
debited and credited, again
rectified)
8 Suspense A/C Dr. 768
To Sales A/C 768
(Being the entry wrongly
debited to the sales ledger
account)
b) Suspense account which shows the rectification of difference amount
Dat
e Particulars J.F. Amount
Da
te Particulars J.F. Amount
To Sales
A/C 768 By Cash A/C 670
To balance
c/d 1612
By G. Tahir
A/Cs 650
By Sales A/C 270
By Electricity
A/C 790
2380 2380
CONCLUSION
It can be summarized from the above report that FA is essential for smooth processing
and gaining effective measures to deal with competition. The current report has included
information regarding business transactions, single , double entry system, difference between

financial reporting and statement, etc The practical examples of journal entries, ledger, profit &
loss A/C, bank reconciliation statement, etc are provided in present report.

REFERENCES
Books and Journals
Amadi, C. and Ejiogu, A., 2021. Introduction to Financial Accounting. In Financial and
Managerial Aspects in Human Resource Management: A Practical Guide.
Emerald Publishing Limited.
Blaufus, K. and Hoffmann, F., 2020. The effect of simplified cash accounting on tax and
financial accounting compliance costs. Journal of Business
Economics, 90(2), pp.173-205.
Filusch, T., 2021. Risk assessment for financial accounting: modeling probability of default. The
Journal of Risk Finance.
Garbowski, M and et.al., 2019. Financial accounting of E-business enterprises. Academy of
Accounting and Financial Studies Journal. 23. pp.1-5.
Kimmel, P. D., Weygandt, J. J. and Kieso, D.E., 2018. Financial accounting: Tools for business
decision making. John Wiley & Sons.
Lee, T. A., 2020. Financial accounting theory. In The Routledge companion to accounting
history (pp. 159-184). Routledge.
Ramachandran, N. and Kakani, R. K., 2020. Financial Accounting For Management|. McGraw-
Hill Education.
Roberts, J., 2021. The boundary of the ‘economic’: Financial accounting, corporate ‘imaginaries’
and human sentience. Critical Perspectives on Accounting, 76, p.102203.
Schroeder, R. G., Clark, M. W. and Cathey, J. M., 2019. Financial accounting theory and
analysis: text and cases. John Wiley & Sons.
Weygandt, J. J., Kimmel, P. D. and Kieso, D. E., 2018. Financial Accounting with International
Financial Reporting Standards. John Wiley & Sons.
Online
What is financial accounting? 2021. [Online]. Available through:
<https://www.accountingedu.org/what-is-financial-accounting/>
What is suspense account? 2021. [Online]. Available through:<
https://www.accountingcoach.com/blog/suspense-account>