Finance Accounting Project: Sole Trader & Private Companies

This finance accounting project provides a comprehensive overview of financial accounting principles and practices. The project begins with an introduction to the double-entry bookkeeping system, detailing how financial transactions are recorded and analyzed. It then progresses to the preparation of trial balances, which are crucial for ensuring the accuracy of accounting records. The project further explores the formation of financial accounts, including income statements and balance sheets, for various sole trader and private companies. The analysis includes practical examples and illustrations, demonstrating how to formulate financial statements and interpret financial data. The project emphasizes the importance of accurate record-keeping and financial statement analysis for effective decision-making in business. The document is contributed by a student to be published on the website Desklib. Desklib is a platform which provides all the necessary AI based study tools for students.

Finance Accounting
Project 1

TABLE OF CONTENTS
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
PROJECT 1......................................................................................................................................1
P1: Concept about Double entry bookkeeping system...........................................................1
P2: Preparation of tail balance................................................................................................6
P3: Formation of financial account........................................................................................7
P4: Formulation of financial statements for various sole trader and other private companies8
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Finance is one of the crucial areas which is related with proper allocation of assets and
debts over a particular period of time. It is more often based on specific kind of situation those
are related with uncertainty. It is considered as more reliable process of capital management. It is
wider term that used to describe various associated activities such as study of money
arrangement and real process of attaining required capital for an organisation. It is about
creation, banking and investment made under various projects of the company. The project
module aims at providing specific information about double entry bookkeeping on that basis
various financial transactions is being recorded into the statements. Another one is associated
with the use of accounting tools in order to deal with financial problems those related within an
organisation. Apart from this, all the information that are collected from this analysis is being
taken into account for preparing financial statements of the company (Edwards, 2013).
PROJECT 1
P1: Concept about Double entry bookkeeping system
In every business organisation, whether operating as small or large they need to keep
their statements up to date. For this purpose, they need record all their financial transactions in
respect to attain maximum outcomes in near future time. Double entry system is said to be one of
the crucial business transaction is having two affects. In case company used to borrows capital
from any financial institution, the cash amount gets increase and their debts account such as loan
payable will also get enhanced at the same period of time. This means that every financial
transaction will get involves two specific account. The debit and credit regulation in double entry
bookkeeping would be stated in many ways. Such as, every business transaction, the entire
amount mentioned on the left side of the statement need to be equal as total amount recorded on
the right side of some other statements (Weil, Schipper and Francis, 2013). It will be basic
system that is being used by an organisation to record every fiscal business transaction. Double
entry bookkeeping statements will be reliable in writing for all data must be equal to debit and
credit sider of the reports. It is essential to fulfil all the necessary accounting equation that is
stated below:
Assets= liability + Equity
Posting of all sales and purchase related transaction into general ledger book:
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General ledger accounting is being used by medium and small organisation those are uses
this method for record of various sales and purchase related transactions. Business must be
entered before transfer them into general ledger. It is being recorded in respect to all statements
which are arises from journal entries account. It has been found that all the entries that are
recorded into the books is having increase of decrease effects on their entire business
performances of assets and debts obligations (Otley and Emmanuel, 2013). All these statements
are held responsible for attaining maximum impacts on the various financial statements of an
organisation. A journal account which will be happens to be taken into account in the first
process of accounting. It will be recorded by taking into account as financial transactions. Some
of the reliable financial entries collected as on 1st June, 2016 are recorded into the statements
which is mentioned below:
Journal entries for each transaction
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Ledger account:
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P2: Preparation of tail balance
It has been considered as one of the main bookkeeping accounting report that consists of
overall balance of company’s ledger accounts. In general terms, a trail balance is more simply
used to prepared through using experience and skilled accountant so that chances of mistake can
be remove in more effectively (Biondi and Zambon, 2013). It consists of various specific
information about credit and debit amount of double entry accounting system which will be
created in respect to test their overall balance. In order to examine or test the total debit and
credit amount are equal the accountant need to frame trail balance. It is one of the vital records
that shows overall balance of the company they are invested or attain within an accounting
period of time. These types of statements are usually prepared at the closing of financial year.
Need and significant of using tail balance:
The main aim of using trail balance is to determine or prove that every value of all debits
amount balance must be equal to the total amount in credit side. If the total debit side cannot get
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equal to the credit side, then it would indicate that there is major errors or mistake in the nominal
books of account (Bhattacharyya, 2012).
Statement of Trial Balance as on 1st June, 2016.
Trail Balance
Particulars
Debit
amount
Credit
Amount
Cash in hand 11070
Cash at bank 60675
Net Capital 65000
Purchases expenses 18000
Bills payable 14000
Bills receivable 12000
Sales expenses 26000
Equipment account 3000
Prepaid Insurance account expenditure 75
Prepaid Rent expenses 150
Stationary account expenses 30
Total 105000 105000
P3: Formation of financial account
In every business organisation, it has been seen that they need to prepare financial
statements for the purpose of making future capital investment in their upcoming projects. Final
account used to give an appropriate idea regarding the present profitability and condition of
business to their administration, owner and other concern parties. Every business matters are
initial recorded firstly into the journal account (Watrin, Pott and Ullmann, 2012). The
information or amount are then after posted into the ledger and lastly transfer into the final
record book. These reports are valuable for various stakeholders and investors to make future
decision in order to attain maximum profit in near future time.
It is the best part of an organisation to make better decision in coming time with the aim
of attaining maximum return in coming period of time. Every business information must be
accurately recorded into the statements so that better outcome through reliable decision can be
made effectively by the concern departments. On the basis of various data, investors needed to
be taken into account for their future projects (Openshaw, 2013).
Income statement for the year ended 31st December, 2017
Particular Amount
Sales 125000
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less: Sales inwards 1500
Total Sales 123500
Minus: COGS 83500
Discount received 1000
Rent received 4850
Gross profit 45850
Expenses:
Rent and rates 1500
Telephone charges 900
Insurance paid 7500
Bad-debts 1200
Depreciation 5000
Wages and salaries 13200
Provision for bad-debts (934)
Less: Bad debts written off (650) 284
Outstanding charges 340
Net profit 15926
Balance sheet as on 31st December, 2017
Liabilities Amount Assets Amount
Creditors 3900 Cash at bank 10594
Rent 490 Cash in hand 340
Suspense account 7489 Debtors 12500
Capital 120800 Motor charges 25000
Drawings (5150) 115650
less: Accumulated Depreciation
5400 19600
Reserves amount 15926 Prepaid insurance 411
Loan provided 100000
143455 143445
P4: Formulation of financial statements for various sole trader and other private companies
Income statement for the sole trader E-bay
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Balance sheet of sole trader of E-bay
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