Financial Accounting Report - Financial Statements Analysis

This financial accounting assignment provides a detailed exploration of financial accounting principles and practices. It begins with an introduction to financial accounting, defining its purpose and outlining relevant regulations, rules, and accounting principles. The assignment then delves into the practical application of these concepts through Task 2, which includes journal entries, ledgers, trial balances, and financial statements for various clients. The report covers the preparation and analysis of financial statements, including profit and loss statements and statements of financial position. It also addresses key accounting concepts such as consistency, materiality, and the purpose and methods of depreciation, as well as bank reconciliation statements. The assignment offers a comprehensive overview of financial accounting, providing valuable insights into the practical application of accounting principles.

Financial Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. Definition of financial accounting..........................................................................................1
2. Regulations related to financial accounting............................................................................1
3. Accounting rules and principles..............................................................................................2
4. Convention and concepts related to consistence and material discloser.................................3
TASK 2............................................................................................................................................4
CLIENT 1....................................................................................................................................4
CLIENT 2..................................................................................................................................14
CLIENT 3..................................................................................................................................16
CLIENT 4..................................................................................................................................18
CLIENT 5..................................................................................................................................21
CLIENT 6..................................................................................................................................22
CONCLUSION..............................................................................................................................24
REFERENCES..............................................................................................................................25

INTRODUCTION
Financial accounting can be defined as process in which all the final accounts such as
balance sheet, income statement and cash flow are prepared, analysed and summarised in order
to evaluate liquid strength of an organisation. Internal as well as external stakeholders may
assess the actual position and performance of the company with the help of financial statements
(Beatty and Liao, 2014). Main aim of this project is to enhance knowledge about financial
accounting and its components. In this report various topics are discussed such as regulations,
rules, principles, conventions that are related to financial accounting. Formulation of journals,
ledgers, trial balance, bank reconciliation statement, final accounts, sales and purchase ledger
control, suspense account etc. are also been covered under this assignment.
TASK 1
1. Definition of financial accounting
Financial Accounting: It is the field of accounting that keeps record of company's
transactions by using standardized guidelines. The transactions are recorded, summarised, and
presented in a financial report or financial statement. Financial accounting is the summary of
company's revenues, expenses, assets, liabilities, balance sheet, and statement of cash flows. In
order to understand the concept of financial accounting Talent Plus has been taken. This
Company prepares financial accounts after analysing the accounting reports and all the needed
information. This is a consultancy firm which helps to find out and optimise a person's full
potential, so that the individual, team, and the company can thrive.
Purposes of financial accounting :
The main purpose of financial accounting is to provide financial information to the
company for decision making and financial report provides company's performance report to
the external parties such as investors, creditors, and tax authorities. Such types of informations
helps to make better decisions for the company and get the accurate profit and loss statements
(Henderson and et.al., 2015).
2. Regulations related to financial accounting
The Accounting standards board (ASB) taken from the Accounting standard committee
(ASC) in 1990. The ASB has power to issue its own standards, the motive being to increase the
quality of standard and increase speed.
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The accounting standards established by the ASB are called 'Financial Reporting
standards' (FRS). Accounting standards are authoritative statements which includes how
particular types of transaction should be recorded in financial statements and accordingly
compliance with accounting standards will normally be needed for financial statements to give
true and fair view.
Development of Accounting standards :
The ASB defines points that become the subject of FRSs, either from own research or
external sources. once the issues have been identified, the ASB produces a discussion draft
which is circulated to any parties who have registered in their interest. All the relevant
information is available on the ASB website and interested parties can make comments on
proposals by e-mail (Hoyle, Schaefer and Doupnik, 2015).
International Accounting standards board:
The International Accounting standards boards (IASB) was formed in April 2001 in
London. IASB foundation is an independent organisation having two main bodies, the Trustees
and the ISAB. The ISAC trustees appoint the ISAB members, and raise the funds needed, but the
ISAB has an responsibility for setting Accounting standards.
3. Accounting rules and principles
Accounting rules are the statement that establishes to record transactions. All the
transactions should be recorded in the books of company using double entry method. Double
entry account6ing method means each transaction involved two or more account, one is debit
and next is credit with the same amount.
Golden rules of Accounting:
 Debit the Receiver, credit the giver – This principle is used in case of personal accounts
which relates to persons with whom a business keeps dealings.
 Debit What comes in, credit What Goes out -This principle is used in case of real
accounts. Real accounts include tangible assets such as machinery,land &building etc. Debit All Expenses and losses, credit All incomes and gains – This rule is applied in
case of nominal account which relates to business expenses, loss should be debit and
incomes and gains should be credit.
Accounting Principles:
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Accounting principles are the set of uniform practices which entities follow to record,
prepare and present financial statements. These principles helps to present true and fair view of
affairs of entity.
 Going concern principle : It assumes the business will continue to exit and function with
no defined end date. A business never exit whether employees and owner of the company
exit and if an accountant is concerned the business should be liquidate, they have to
disclose this GAAP principles.
 Full Disclosure principle : It is generally accepted accounting principle that requires to
disclose all the information which relates to business and financial statements.
 Cost principle : The cost principle highlights the cost of an item shouldn't change. It
states that A business should use the historical cost of an item in books, not the resell
cost.
 Matching principle : This principle states that each item of revenues should match with
an item of expenses.
 Materiality principle : This principle defines that the accountant should use their best
judgement in order to record a transaction or addressing an error also use their
professional opinion.
 Conservatism : This principle defines that the accountant use their best judgement in a
situation . When there is more than one option to record transaction then the accountant
should select best option for running the business.
 Revenue Recognition principle : This principle helps to reported revenues when its
earned, regardless payment for the product is actually received.
 Monetary unit : This principle dictates all transactions be recorded in same currency.
Inflation shouldn't be considered in financial reports (Kieso, Weygandt and Warfield,
2016).
4. Convention and concepts related to consistence and material discloser
Accounting concept defines the assumptions on the basis of which financial statements of
any entity are prepared. Concept provides a unifying structure and internal logic to accounting
process. In order to maintain uniformity and consistency in preparing and keep record of book of
accounts, certain principles and rules have been followed. These rules/ principles are classified
as concepts and conventions which helps to maintain accounting records.
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Consistency: According to this convention accounting policies should remain unchanged
from one period to another. The rules, practices, concepts and principles used in accounting
should be observed continuously. It states that whenever any organisation has selected a method
for the accounting treatment of an item, all similar items should be treated in the same day, year
to year or period to period. It helps in comparison of financial performance on yearly basis.
Materiality: This concept is the exception of “full discloser concept” material
information and its misstatement influence the economic decisions of organisation which is taken
on the basis of financial information. Whenever decisions are required regarding the
appropriateness of a particular accounting judgement then materiality concept suggests (Libby,
2017).
TASK 2
CLIENT 1
Journals entries:
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Ledgers:
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