Financial Accounting Report: Dandy Retail Business - June 2019

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Financial Accounting
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Contents
Introduction......................................................................................................................................3
1)......................................................................................................................................................4
2)......................................................................................................................................................6
3)....................................................................................................................................................11
Conclusion.....................................................................................................................................16
References......................................................................................................................................17
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Introduction
This report deals with the Dandy which is a retail Business. The accountant of the Dandy has
made the trial balance and the June moths records of the year 2019. This report explains the
various events in June which have occurred in the organization. This report involves the
correction of the wrong transactions in June by making changes in the trial balance, ledger and
financial reports.
This report described the concept of the prudent report along with the principle of prudence with
the examples.
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1)
There were various sales in June many of the sales were on a credit basis such as on 2nd June
2019 product of £ 1400 were sold to the Mild, on June 5, 2019, a product of £ 1200 were sold to
the Tup on credit basis, product of £ 2600 and £3 100 was sold to Warm on June 11th and on
June 24th a product of £ 2060 was sold to Wet (Accounting capital, 2019). There were also
various sales return which was on the credit basis which involves goods return by the Cold of £
1200 on June 16 and the goods returned by the Freeze of £ on June 20. There were various cash
sales in June which involved selling of 3 items on the cash basis of £ 920, £ 3400 and £ 2500 on
14th, 25th, and 27th June. So, there were total sales of £ 315, 480 in the income statement of the
company at the end of June month.
There was also various purchase done by the Dady on the credit basis such as goods purchased
From Dark on June 5 of £ 2650, Purchased from Night of £ 1400, purchased from Lin of £ 2000,
purchased from Night of £ 870 and purchased from Shine of £ 3,100 (Accounting capital, 2019).
There were also the various purchase return made to Dark on June 9 of £ 2650 and to Ray of £
2200. They're also one cash purchase transaction done by the company on June 27th of £ 2100.
So, the amount of purchase in the trial balance at the end of June showed £ 166,960 in the
income statement.
On June 20 there is a Loan taken by the company of £ 20000 which is further added to the
previous borrowings of £ 28000 and under the Loan column of the balance sheet it showed an
amount of £ 48000. There were various expenses incurred in June in the organization such as the
rent of £ 4,100, Electricity expenses of £ 1700 and 200 as well as the wages of £ 4000. These
amounts were added to the previous expenses from July 2016 to May 2019 and then show it into
the income statement of the company.
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New equipment was purchased on June 21 of £ 20000 which was added to the previously
purchased equipments which altogether was £ 190000 and after reducing the depreciation of
52000 it was shown as the £ 138000 equipment under the heading of Non-current assets. There
were Drawings of £ 3000 on June 29th and along with the previous old drawings of £ 5000
which also involved the £ 1000 of electricity was wrongly added and then made the correction
and finally it showed the £ 7000 in the trial balance of the company.
There were also many mistakes the occurred in the financial transactions of the Dandy which
was corrected later (Toppr, 2019). An electricity expense was wrongly added to the drawing of £
1000 then it was corrected by debiting the electricity account and crediting the Drawing account
with £ 1000. The amount of the wage expenses of £ 500 was missing which then corrected by
debiting the wages account and by crediting the accruals account. The entry of the prepaid rent
was later made in on the 30th June by debiting the prepayment account and crediting the rent
expenses at £ 1250. The preparation of the Depreciation account was to make in June and it was
made by Debiting the depreciation account with £ 18000 and by crediting the provision for
depreciation account of £ 18000. There an increase in the allowance which was correctly
recorded in June by debiting allowance expenses account with £ 770 and by crediting Provision
for depreciation account with £ 770. So, after verifying all these mistakes and the transactions
which were made in June, trial balance, income statement and the financial position of the
company prepared from July to June. Trail balance showed an increase in the sales from 301,000
to 315,480 and purchases showed the increase from 154,840 to 157,960. Income statement
showed a net profit of £ 37,740. There were also discount allowed and received during the
purchase and sale of the goods in June which also impacted the income statement of the
company (Maynard, 2017).
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2)
Sales day book
Date Customer Invoice No. Amount (£)
2-Jun Mild 35 1400
5-Jun Tup 36 1200
11-Jun Warm 37 2600
11-Jun Warm 38 3100
24-Jun Wet 39 2060
30-Jun Tup 94 4000
30-Jun Cash 600
Total 14960
Purchase
Date Supplier Invoice No. Amount (£)
5-Jun dark 139B 2650
6-Jun Night XXX97 1400
8-Jun Lin 8814 2000
10-Jun-19 Night 140B 870
21-Jun Shine 210955 3100
30-Jun Lin 8819 1800
Total 11820
Purchase return
Date Supplier Credit note no. Amount (£)
9-Jun Dark XX949 2650
18-Jun Ray 712 2200
30-Jun Night C48 1400
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Total 6250
Ledger Account Dr Cr
Sales 316960
Purchase 160410
carriage inwards 1400
return outwards 11700
wages 41,190
Rent 37,230
Electric 17000
Inventory 51600
Loan 48000
Trade receivables 51720
Allowances for receivables 3770
Trade payable 27,940
Equipment 165,000
Bank 79,010
Drawings 7000
Capital 205000
Discount allowed 500
Prepayments 1250
Accrual 500
Discount received 210
Allowance expenses 770
Total 614080 614080
Financial Position at 30 June 2019
£ £ £
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Noncurrent assets Cost Depreciation Carrying
equipment 190,000 -52000 242,000
Current assets
Inventory 51,600
Trade receivables 51720
Less: Allowance for doubtful debts 3770 47950
bank 79,010
Repayment 1250
127810
369810
capital
Opening 205,000
Net profit 37,740
Drawings -7000
235,740
Noncurrent liabilities
Loan 48000
Current liabilities
Trade payables 27540
Accruals 500 28040
369810
Tup
Date Description Dr Date Description Cr
30-Jun To sales 4000 1-Jun Balance b/d 301,000
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30-Jun Balance c/d 297,000
Total 301,000 Total 301,000
Equipment
Date Description Dr Date Description Cr
1-Jun balance b/d 170,000 1-Jun By depreciation 18,000
21-Jun New equipment (CB) 20,000
30-Jun To cash 9000 30-Jun Balance c/d 181,000
199,000 199,000
Cash Receipt
Date Detail Dis. Allowed Total Cash sales Receivables Other
12-Jun Wind 400 4600 4600
14-Jun items Sold 920 920
18-Jun Mild 100 1300 1300
20-Jun loan 20,000 20,000
25-Jun items Sold 3400 3400
27-Jun items Sold 2500 2500
30-Jun items Sold 600 600
30-Jun Warm 3100 3100
30-Jun Equipment 9000 9000
Total 500 45420 7420 5900 29,000
Cash Payment
Date Detail
Dis.
Received Total
Cash
purchase
Payable
s Rent
Electr
ic
Othe
r
10-Jun Rent 4100 4100
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Paid
12-Jun Dark 150 2500 2500
14-Jun Shadow 60 820 820
16-Jun Electric 1700 1700
21-Jun
Equipm
ent
2000
0
2000
0
25-Jun-02 Electric 200 200
27-Jun
Purchas
es 2100 2100
29-Jun
Drawin
gs 3000 3000
29-Jun Wages 4000 4000
30-Jun Night 870 870
Total 210
3929
0 2100 4190 6000
2700
0
Lin
Date Description Dr Date Description Cr
30-Jun Balance c/d 3800 8-Jun By purchases 2000
30-Jun By purchases 1800
Total 3800 Total 3800
Warm
Date Description Dr Date Description Cr
11-Jun To sales 2600 30-Jun By cash 3100
11-Jun To sales 3100 30-Jun Balance c/d 2600
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Total 5700 Total 5700
Night
Date Description Dr Date Description Cr
30-Jun To cash 870 6-Jun By purchases 1400
30-Jun To purchase return 1400 10-Jun By purchases 870
Total 2270 Total 2270
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3)
Prudence concept
For the preparation of the financial information, there is a need for professional judgment which
helps in the adoption of the accounting policies and the estimates. For the adoption of the
policies and the significant estimates, an accountant should practice the degree of caution such
that income or the assets are not overstated and the liabilities are not understated (Barker, 2015).
The rationale behind this concept is that an organization should not recognize the value of the
assets which is more than the amount which is expected to be recovered from its use or the sales.
In the same way liability of an organization should not be shown less than the amount which is
likely to be paid in the future scenarios.
Because the companies often get advantages from the better profitability reports and the lower
gearing in the form of high share price and the cheaper sources of finance, there is an internal
risk of assets and income are being overstated. There is furthermore a risk that offered leverage
in the accounting policy choice and the estimated outcome may show bias in the preparation of
the financial information whose objective is improving the financial position and the profitability
of the company with the help of the accounting techniques. So, the prudence concepts help in
countering such bais by practicing the caution at the time estimate and while adopting the
accounting policies (Mora, 2015).
These are the accounting principle which ensures that the income or the assets are not overstated.
Whether an amount is known for estimation there will be provisions made for all the losses and
the expenses so, it ensures that the liabilities or the expenses are not understated in the books of
account.
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