Financial Accounting Report: Stakeholders, Statements, and Analysis

This report provides a comprehensive overview of financial accounting, starting with definitions and purposes. It delves into accounting rules, principles, and the roles of internal and external stakeholders within a business. The report examines the qualitative characteristics of financial reporting and their impact on public limited companies. It includes detailed journal entries, ledger accounts, and a trial balance for a specific client (Alexandra Study), followed by an analysis of financial statements, including profit and loss accounts and balance sheets for another client (Munteanu Limited). The report further explores accounting concepts such as consistency and prudence, the meaning and methods of depreciation, and a comparison of financial statements prepared by sole traders and limited companies. It concludes with a discussion on the purpose of bank reconciliation statements and areas of variance between bank and personal records, and the importance of control accounts. The report offers a thorough understanding of financial accounting concepts and their practical application.

Finance

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1 Define financial accounting & purposes...................................................................................1
2. Accounting rules & principles.................................................................................................1
3. Internal & External stakeholders of business organisation......................................................2
4. Qualitative characteristic of financial reporting impact on the financial information
published by public limited companies.......................................................................................3
CLIENT 1........................................................................................................................................3
Journal Entry in the books of Alexandra Study...........................................................................4
(b) LEDGER ACCOUNTS.........................................................................................................7
c. Trial balance at 31st January 2019.........................................................................................15
CLIENT 2......................................................................................................................................16
(a) Profit and loss account of Munteanu Limited......................................................................16
(b) Balance Sheet of Munteanu Limited....................................................................................17
C. Accounts concepts such as consistency & prudency............................................................18
D. Meaning of depreciation & its methods................................................................................18
e. Evaluate the difference between financial statements prepared by the sole trader & the
limited companies......................................................................................................................19
CLIENT 3......................................................................................................................................19
1 . Purpose of BRS & why the business is facing difficulties...................................................19
2 . Areas where bank records vary from personal records........................................................20
Bank reconciliation statement....................................................................................................20
CLIENT 4......................................................................................................................................20
(a) Books of Hilly......................................................................................................................21
B .Control account.....................................................................................................................22
Client 5...........................................................................................................................................22
a. suspense account and its features...........................................................................................22
(b) Drafting of Trail Balance:....................................................................................................22
(c) Trial balance have credit balance of £ 3300 as suspense account........................................23

CONCLUSION..............................................................................................................................23
REFERENCES..............................................................................................................................25

INTRODUCTION
Finance is a term describing the various elements of an business such as investments,
money and other financial instruments. It is the backbone of the corporation and without it
company can not start its business activities. To be successful it is necessary to manage financial
sources so that more profits can be generated (Hong and Kostovetsky, 2012). To better
understand this concept, Corporate financial solutions is selected, which is London based
company. In this report there are following topics are covered such as: financial accounting & its
purposes, internal and external stakeholders of a large organisation. Apart from this, report
discuss about journal, ledger, trial balance, sole trader and Bank reconciliation statement.
MAIN BODY
1 Define financial accounting & purposes
Financial accounting is the process of recording transaction, summarising and reporting
and analysing the information at every financial year. In Corporate financial solutions the
financial statements are prepared by the accountant (Huang and Kisgen, 2013). It involves
balance sheet, income statement etc. It help the organisation to prepare their financial statement
as per the accounting regulations. Importance of financial accounting is describe as below :
 Financial accounting is important because it helpful to record the transactions.
 Business organisation use financial accounting to communicate information & data to
external parties which is helpful to take important decisions (Jordà and Taylor, 2016).
 Small business owners use financial accounting information to analyse competitors &
identify investment opportunities.
2. Accounting rules & principles
There are various accounting rules which are helpful to make financial statements which
are as:
Type of account Golden rules
Real account Debit what comes into the business
Credit what goes out from the business
Personal account Debit the receiver (Kaczynski and Smith,
2014).
1

Credit the giver
Nominal account Debit all the expenses and loss
Credit all the incomes and gain (Law and
Singh 2014).
Accounting principle :
Dual aspect concept : As per this principle it is necessary for the organisation to record
the transactions on both sides which are debit as well as credit. If company follows the single
entry system than irreverent information can be produced. With the help of this concept this
problem can be solved because every transaction has recorded both side with same amount (Lee,
and Cowling, 2015).
Cost principles : As per this principle it is required for the company to record the assets
in books at its acquiring cost. So it can be said that corporation can record an asset on balance
sheet for the amount paid while purchasing it.
Matching principles : As per this concept, all expenditures of business should be match
with revenues which belongs to same accounting period (McLean and Zhao, 2014).
3. Internal & External stakeholders of business organisation
In a large business organisation there are two types of stakeholders which are as internal
& external stakeholders. Internal stakeholders are those persons who have direct interest in
making plans, policies, strategies, project, process and product. It involves :
Board of directors: The BOD are directly related to the business of organisation and
they have power to make plans for future growth and take important decisions for benefit of
corporation (Midrigan and Xu, 2014).
Employees : These are the internal stakeholders and they work for the corporation so that
it can achieve its goals and get success. They are also interested in financial information because
if company is financially strong and it is earning profits than salaries of employees can be
increased (Okawa and Van Wincoop, 2012).
External stakeholders are as follows :
Customers : These are those persons who purchase the products and services of
organisation and in return it charge consideration which is in the form of money. The primary
2

focus of company is to satisfy the needs of consumers (Philippon and Reshef, 2012). They are
interested in financial information because if it financially strong than it can produce quality
products because it can use quality resources in manufacturing as a result persons get superior
products.
Suppliers : The person who provide raw material to the organisation is known as
supplier so that company can produce final products and sell it to the market. They are interested
in financial information because if corporation is financially strong than it can pay money on
time to the suppliers (Loughran and McDonald, 2016).
Government : It collect the tax form the profits which is earned by organisation and it
makes rules & regulations which are needed to be follow. They are interested in financial
information of the business as they can ascertain whether or not company is paying its all due
taxes (Guiso and Sodini, 2013).
Creditors : The person from which company can borrow money so that it can expand its
business and make future plans for expansion. In return it have to pay interest. On the basis of
financial information creditors can analyse the capability of organisation to pay the borrowed
money (Greenwood and Scharfstein, 2013).
4. Qualitative characteristic of financial reporting impact on the financial information published
by public limited companies
There are various qualitative characteristics of financial reporting which are beneficial for
the company to take important decisions. It involves: understandability, relevance, reliability and
comparability. It is necessary for the public limited companies to publish its financial statements
and it provide various information which useful in decision making process. Organisation is
impacted as they require to publish financial information in such a way that it can fulfil
relevancy & reliability feature. If these information will be reliable than important decision can
be taken for the benefit & growth of organisation (Gallagher and Koleski, 2012).
CLIENT 1
3

Journal Entry in the books of Alexandra Study
Date Particulars Dr Cr
01/01/
19
Premises A/c Dr. 240000
Motor Van A/c Dr. 51250
fixtures A/c Dr. 8100
Inventory A/c Dr. 23900
P Mole A/c Dr. 4400
F Lane A/c Dr. 6100
Bank A/c Dr. 68400
Cash A/c Dr. 15600
To S Hood A/c 12150
To J. Brown A/c 16600
To Capital A/c (Balancing Figure) 389000
(Being Owner's Capital is calculated )
Therefore, Alexandra Study's Capital at 1st January = £
389000
Date Particulars Dr Cr
01/01/
19
Storage cost A/c Dr. 450
To bank A/c 450
(Being storage cost is paid)
02/01/
19
Purchases A/c Dr. 7680
To S Hood A/c 1450
To D Main A/c 2060
4

To W Tone A/c 960
To R Foot A/c 1610
(Being goods purchases on credit from various parties)
03/01/
19
J Wilson A/c Dr. 1200
T. Cole A/c Dr. 1650
F. Syme A/c Dr. 2100
J. Allen A/c Dr. 1020
P. White A/c Dr. 2520
F Lane A/c Dr. 980
To Sales A/c 9470
(Being goods sold on credit to various parties)
04/01/
19
Motor Expenses A/c Dr. 470
To Cash A/c 470
(Being motor expense is paid)
07/01/
19
Capital A/c Dr. 1500
To Cash A/c 1500
(Being cash withdrawal by owner himself)
09/01/
19
T. Cole A/c Dr. 680
J. fox A/c Dr. 1310
To Sales A/c 1990
(Being goods purchase on credit with various parties)
5

11/01/
19
Sale Return A/c Dr. 680
To J. Wilson A/c 270
To F. Syme A/c 410
(Being goods is returned back by the parties
16/01/
19
Bank A/c Dr. 7020
To P. Mullen A/c 1400
To F. Lane A/c 3100
To J. Wilson A/c 850
To F. Syme A/c 1670
(Being Payment received from various parties)
19/01/
19
R Foot A/c Dr. 50
To Purchases Return A/c 50
(Being Goods is returned to creditor)
22/01/
19
Purchases A/c Dr. 3740
To L Mole A/c 1830
To W Wright A/c 1910
(Being goods purchased on credit)
24/01/
19
S Hood A/c Dr. 3600
J Brown A/c Dr. 4600
R Foot A/c Dr. 1400
6

To Bank A/c 6000
(Being payment is made to creditors)
27/01/
19
Salaries A/c Dr. 4800
To Bank A/c 4800
(Being salaries are paid through cheque)
30/01/
19
Business Rates A/c Dr. 1320
To Bank A/c 1320
(Being business rates are paid through cheque)
(b) LEDGER ACCOUNTS
Storage Cost A/c
Date Particulars Amount Date Particulars Amount
01/07/
19
To Bank A/c 450 31/07/1
9
By Profit & Loss A/c 450
Total 450 Total 450
Sales A/c
Date Particulars Amount Date Particulars Amount
31/01/
19
To Trading and P&L
A/c
11460 03/01/1
9
By J Wilson A/c 1200
By T. Cole A/c 1650
By F. Syme A/c 2100
By J .Allen A/c 1020
By P .White A/c 2520
By F .Lane A/c 980
09/01/1 By T .Cole A/c 680
7

9
By J fox A/c 1310
Total 11460 Total 11460
S Hood A/c
Date Particulars Amount Date Particulars Amount
24/01/
19
To Bank A/c 3600 01/01/1
9
By Opening Balance
(B/f)
12150
02/01/1
9
By purchases A/c 1450
31/01/
19
To Closing Balance
C/d
10000
Total 13600 Total 13600
W Tone A/c
Date Particulars Amount Date Particulars Amount
31/01/
19
To Closing Balance
C/d
960 02/01/1
9
By purchases A/c 960
Total 960 Total 960
J Wilson A/c
Date Particulars Amount Date Particulars Amount
03/01/
19
To Sales A/c 1200 11/01/1
9
By Sales Return A/c 270
16/01/1
9
By Bank A/c 850
31/01/1
9
By Closing Balance c/d 80
Total 1200 Total 1200
8

F Syme A/c
Date Particulars Amount Date Particulars Amount
03/01/
18
To Sales A/c 2100 11/01/1
9
By Sales Return A/c 410
16/01/1
9
By Bank A/c 1670
31/01/1
9
By Closing Balance c/d 20
Total 2100 Total 2100
P White A/c
Date Particulars Amount Date Particulars Amount
03/01/
19
To Sales A/c 2520 31/01/1
9
By Closing Balance c/d 2520
Total 2520 Total 2520
P Mullen A/c
Date Particulars Amount Date Particulars Amount
01/01/
19
To Opening Balance
(B/f)
4400 16/01/1
9
By Bank A/c 1600
31/01/1
9
By Closing Balance c/d 2800
Total 4400 Total 4400
Capital A/c
Date Particulars Amount Date Particulars Amount
9