Financial Accounting Assignment: Ledgers, Trial Balance, Depreciation

This financial accounting assignment delves into the core principles of financial reporting, using Marks and Spencer as a case study. It begins with an introduction to financial accounting, its purpose, and the various stakeholders involved, both internal (managers, owners) and external (investors, government, suppliers, auditors), and their respective interests in financial statements. The assignment then progresses to practical applications, including journal entries, ledgers, and a trial balance for a client. It covers key accounting concepts like consistency and prudence, explaining their significance. Furthermore, it explores the purpose and methods of depreciation (straight-line method), differences between sole traders and limited companies, and the preparation of a bank reconciliation statement. The assignment is structured around five clients, each presenting specific accounting tasks, demonstrating a comprehensive understanding of financial accounting practices. Finally, it concludes with a summary of the key takeaways and a list of references.

FINANCIAL ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1) Financial accounting and its purpose......................................................................................1
2.Internal and external stakeholders in relation with their interest in financial statements........2
CLIENT 1........................................................................................................................................3
2. Ledgers....................................................................................................................................7
3. Trial balance..........................................................................................................................13
CLIENT 2......................................................................................................................................14
3. Accounting concepts.............................................................................................................15
4. Purpose and methods of depreciation...................................................................................16
5. Difference between sole trader and limited company...........................................................17
CLIENT 3......................................................................................................................................18
a) The purpose of preparing bank reconciliation statement......................................................18
b) Reasons for variation in bank records with that of cash book..............................................19
c) Explanation of term “ Imprest”.............................................................................................19
d) Bank reconciliation statement...............................................................................................20
CLIENT 4......................................................................................................................................21
CLIENT 5......................................................................................................................................22
CONCLUSION..............................................................................................................................23
REFERENCES..............................................................................................................................25

INTRODUCTION
Financial accounting refers to a system which is used to maintain the record of the
financial transactions of company. It consist of elements such as income statement , balance
sheet and cash flow statement which include the information regarding different transaction on
the basis of their nature. In this study, Marks and Spencer will be considered for completing the
task. This a global company operating in a retail sector in different regions. Furthermore, the
assignment will provide understanding about purpose of financial accounting. Moreover, it
consist the information regarding different stakeholders of Marks and Spencer. It will also
provide understanding about consistency and prudence concepts of accounting.
1) Financial accounting and its purpose
Financial accounting is a system which is used by companies in order to record the
various financial transaction in order to determine the profitability of firm. The financial la
information is recorded by companies to identify the performance of firm on the basis of past
recorded data. The financial accounting main purpose is to provide financial information to its
users which assist them in making economic decision. It includes preparing various statement
such as income statement which consist of information about incomes and expense for the
period.
This statement is prepared in order to determine the profitability of firm. The another
statement which is used by stakeholders is balance sheet which provide understanding about the
liquidity position of firm and contains components such as assets and liabilities (Kimmel and
et.al., 2016). The purpose of financial accounting is provide clear understanding to its users
regarding the company's performance so that they are able to make decision regarding their
investment and other economic decision. The financial statement contain the information about
day to day operations performed by organisation.
The users of financial information are stakeholders of enterprise. With the help of
financial accounting company is able to make budgets for its future which assist in reducing their
expenses for future to increase the future profitability. It informs readers about the current status
of company so that they are able to make effective decision. The financial accounting is related
to the financial information which regarding day to day operations of firm.
The purpose of financial statement is to provide accurate information regarding the firm's
operations so that the users are able to make the right decision by comparing the financial
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statement of company with that of other company. With the help of financial accounting the firm
is able to prepare various budgets which consist of cash, sales, operating etc. on the basis of past
record of company to identify the changes in the profitability of company by comparing the
actual performance with that of forecasted (Mullinova, 2016). The purpose of financial
accounting is to maintained the accurate information about the day to day operations of business.
Moreover, it contained information to present the information so that it is useful for the
stakeholders to understand in a better way regarding the profitability and performance of the
company with that of its competitors .
2.Internal and external stakeholders in relation with their interest in financial statements
Internal stakeholders are the entities who are present within the organisation. The two
internal stakeholders are-
Managers- they manage the internal functioning of the company and requires accounting data
for the preparation of the budget effectively and to review the performance of the firm by
comparing the standard plan with the actual results (Narayanaswamy, 2017). They need financial
data to plan and to make decisions regarding the allocation of the human, capital and financial
resources adequately so that higher profits can be generated in the business.
Owners- for the assessment of the performance of their business they need the financial
statements that facilitates the information in relation to the overall profitability and the financial
position of the company in the market. It also helps the owners in knowing about the stability
and the riskiness in their business and how the changes in the economy has affected their
working. The accounting information also assist them in making decisions regarding the
expansion and investment.
External stakeholders are the entities that not present within the organisation but are
affected by the performance of the business. The four external stakeholders are-
Investors- As they invest in the equities and other convertible debentures of the corporate so for
knowing the performance of their investment they make use of the financial information so that
they could be able to determine that the investments made by them is going good or not or
whether they sell it or purchase more.
Government- government monitors the accounting information and ensure that all the
disclosures made are as per the rules and regulations to prevent the stakeholders interest who
make decisions on the basis of such information.
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Suppliers- for analysing the credibility of their customers they need accounting information so
that they could determine that the goods can be offered on credit or not. They also uses
accounting data of its customers to assess the soundness of their business which is very
important for the growth of the business.
Auditors- external auditors make examination of the statements to prepare an effective audited
statements and can frame audit opinion regarding the accuracy and fairness of the fiancial
statements.
CLIENT 1
Journal entries in the books of Alexandra for January are as follows
Date particulars Debit Credit
1st jan 2019 Storage exp.A/c Dr 450
To bank A/c
2nd jan 2019 Purchase A/c Dr 6080
To S. hood A/c 1450
To D main A/c 2060
To W Tone A/c 960
To R foot A/c 1610
3rd jan 2019 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 F. Lane A/c Dr 2520
F. lane A/c Dr 980
To sales A/c 9470
4th jan 2019 Motor Exp. A/c Dr 470
To cash A/c 470
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7th jan 2019 Drawing A/c Dr 1500
To cash A/c 1500
9th jan 2019 T. cole A/c Dr 680
J. Fox A/c Dr 1310
To sales A/c 1990
11th jan 2019 Sales return A/c Dr 680
To J. wilson 270
F.syme 410
16th jan 2019 Cash A/c Dr 7020
To P. Mullen A/c 1400
To F. Lane A/c 3100
To J. Wilson 850
To F. Shyme 1670
19th jan 2019 R. foot A/c Dr 50
To Purchase return A/c 50
22st 2019 Purchase A/c Dr 3740
To L.Mole A/C 1830
To W. Wright 1910
24th jan 2019 S. Hood A/c DR 3600
J. Brown A/c Dr 4600
R. Foot A/c Dr 1400
To Bank A/c 9600
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27th jan 2019 Salary A/c Dr 4800
To bank A/c 4800
30th jan 2019 Business rates A/c Dr 1320
To bank A/c 1320
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2. Ledgers
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