Financial Accounting Assignment - Client Transaction Analysis Report

This financial accounting assignment delves into various aspects of financial accounting through the analysis of multiple client scenarios. It begins with an introduction covering the core purposes, regulations, accounting rules, and principles, including conventions like consistency and material disclosure. The assignment then presents several client cases (Client1 to Client 6), each requiring the preparation of journal entries, ledger accounts, trial balances, profit and loss statements, and balance sheets. The tasks involve applying accounting concepts to real-world transactions, such as purchases, sales, expenses, and capital adjustments. Specific requirements include preparing journal entries, creating ledger accounts, constructing trial balances, and generating financial statements like the statement of profit and loss and the balance sheet. Additionally, the assignment addresses specific topics like bank reconciliation statements and suspense accounts, and the differences between them, along with the application of accounting concepts such as consistency and prudency. The assignment aims to provide a comprehensive understanding of financial accounting practices and their application in diverse business contexts. The document includes references to academic sources to support the concepts discussed.

FINANCIAL
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
(a) 1. Examining the Financial Accounting and it's purposes......................................................1
(a) 2. Examining the regulations relating to financial accounting ..............................................2
(a) 3. Describing the Accounting rules and principles.................................................................3
(a) 4. Explaining the conventions and concepts relating to the consistency and material
disclosure.....................................................................................................................................4
CLIENT1.........................................................................................................................................5
(a) Journal Entry in the books of David Study...........................................................................5
(b) LEDGER ACCOUNTS .........................................................................................................8
(c) Trial Balance as at 31st January, 2018................................................................................14
CLIENT 2......................................................................................................................................16
(a) Statement of profit and loss for Peter Hampau for the year ended 31st July 2018 .............16
(b) Statement of financial position for Peter Hampau as at ended 31st July 2018 ...................17
CLIENT 3......................................................................................................................................17
....................................................................................................................................................18
(b) Balance Sheet of Bowling Limited......................................................................................19
(c) Accounts concepts such as consistency and prudency.........................................................19
Client 4...........................................................................................................................................21
(i) Purpose of bank reconciliation statement ............................................................................21
CLIENT 5......................................................................................................................................22
(a) Books of Henderson.............................................................................................................22
CLIENT 6......................................................................................................................................23
(a) Suspense Account.................................................................................................................23
(b) Drafting of Trail Balance:....................................................................................................24
(c) Trial balance have credit balance of £ 330 as suspense account..........................................24
(d) Difference between a Suspense A/c and Clearing A/c.........................................................25
CONCLUSION..............................................................................................................................25
REFERENCES..............................................................................................................................27

INTRODUCTION
In modern times the financial accounting plays an integral part in managing and
ascertaining the operational activities of the business entity also ascertain it's performance.
Financial accounting refers to the process of preparation of annual or financial statements that
are used to record and depicts the financial performance as well as the operational experiences of
the organisation(Weil, Schipper and Francis, 2013). These statements forms a financial or
annual report of the organisation of the organisation which are mainly useful for the internal as
well as the external parties of the business entity. Besides this, the report pertain the knowledge
and evaluation regarding the financial statements of the small accountancy organisation like Taj
Accountants (UK).
(a) 1. Examining the Financial Accounting and it's purposes
Financial Accounting refers to the process of recording, summarising and reporting the
myriad of business operational activities over an accounting era(Schaltegger and Burritt, 2017).
These operational transactions are summarized in the preparation of the financial statements,
involves balance sheet, income statements and cash flow statement that depicts the operating as
well as the financial performance of the business organisation like Taj Accountancy over a
specific accounting era.
There are some purposes of the financial accounting for the business organisation, which are
mentioned underneath.
 Financial Accounting used for maintaining the systematic records: The financial
accounting refers to the systematic record of the systematic record of the financial
transactions of the organisation. The financial accounting helps in maintaining the
systematic record of the business transactions by recording them on the accrual basis.
 It is used for the purpose of protecting the business properties: The accounting also
used for the purpose of protecting the properties or assets of the business organisation for
unreasonable or unwarrantable use(Zeff, 2016).
 Financial accounting is specialized for completing the purpose of ascertainment of
operational profit or loss: Among all the purpose the main purpose of adapting the
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financial is to find out or quantify the accurate values of the profits or losses incurred
from the business operational activities of the organisation(Edwards, 2013).
 It is used for the purpose of ascertaining the financial performance of the business:
The accounting also used for the purpose of ascertaining the the financial performance of
the business organisations. As accounting helps in keeping the systematic record of the
past accounting years that renders a base or the comparative basis that is utilised by the
organisation to compare and ascertain the profit margin as well as the probability(Khan,
2015).
 It is used to ensure effective decision making within the organisation: The financial
reporting helps the managers to make further futuristic decision regarding the business
operational activities of the organisations. With the help of accurate financial records
regarding the business activities it helps the managers to quantify the actual output from
the business activities and take further actions for ensuring more betterment and attaining
the more favourable outcomes(May, 2013).
(a) 2. Examining the regulations relating to financial accounting
There are some regulations for guiding the process of accounting in order to perform it
prominently and effectively. Some regulations are mentioned below.
 The procedure pertains some rules, standards and procedures of Generally Accepted
Accounting Principles (GAAP) which are designed as regulatory body for the prominent
and accurate preparation financial statement. The GAAP pertains several regulations like
Principle of Regularity, Consistency, Precedence and Periodicity etc.
 Regulations regarding the International Financial reporting Standards are also required to
be follow by the accountants of the organisations like Taj accountancy firm (UK) as due
to it depicts the appropriate manner for reporting of particular transactions and events in
financial statements(Broadbent and Cullen, 2012).
 Regulations regarding Financial Accounting like debit and credit rules of accounts and
their treatment in accounting are required to be follow by the accountant of organisation
like Taj accountancy firm (UK). So appropriate and accurate information reported in
financial statements.
 Accordance with the Companies Act it becomes compulsory to produce the Books of
accounts for developing the knowledge of general public for enhancing their observations
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and knowledge regarding the financial statements of any organisation and make their own
regarding the investment or disinvestment(Beatty and Liao, 2014).
(a) 3. Describing the Accounting rules and principles
Financial Accounting requires and pertain assorted set of rules and principles which are
required to be follow by each accountant of organisations like Taj Accountancy Firm (UK) while
the preparation of the financial statements which are mentioned underneath:
Debit the receiver, credit the giver: This principle mainly applied for the treatment of
Personal accounts. Some examples of personal account are debtors, banks, creditors, capital
account etc. when the organisation received something in form of cash raw material or anything
from other organisation or individual then in case of personal account the it must be crucial to
debit the account of that organisation or individual and if the organisation gives some cash or
anything to other organisation or person then it the account of that individual or organisation
must be credit(Edwards, 2013).
Debit all expenses and losses, credit all incomes and gains: This rule is applicable
while the treatment of Nominal accounts. Under the treatment of nominal account, all the
expenses and losses of the organisation are to be debited in the books of accounts and all the
incomes or gains of the organisations are to be credited(Needles, Powers and Crosson, 2013).
Debit what comes in, credit what goes out: This principle is mainly applicable while the
treatment of the real accounts. The real account pertain the machineries, land and buildings etc.
For example, an organisation acquire furniture of $ 30000 by cash, then the furniture comes
under the real account and furniture account is required to be debited by $ 30000 and cash
account must be credited by $ 30000.
Some principles of the Financial accounting are mentioned underneath:
 Dual aspect concept: Dual aspect concept defines that the organisations are required to
record their business transactions accordance with the dual reporting concepts, it states
that every transaction has its double effects or must be recorded twice in the books of
accounts as double on both debit and credit side of books. As in case of Single entry
system every transactions are to be recorded once and it has only one aspect of the
transaction which leads to recording of relevant informational data in books of accounts
an inappropriate manner. That is why, in order to prevent such kind of problem the dual
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aspect principle requires that every and each transaction is required to be recorded on
both debit and credit side of accounts.
 Cost principle: This principles examines that costs of business assets are required to be
recorded at accurate acquiring cost (costs price+installation charges). It means that
business assets must be recorded by the organisation at their costs of acquisition, as they
are obliged to evaluate the assets balances while preparing the several accounts and final
accounts such as depreciation accounting and balance sheet(Taipaleenmäki and
Ikäheimo, 2013).
 Matching principle: This principle examines that the all the relevant expenses incurred
by the organisations are required to be charged to the income statement in an accounting
era in which revenues are earned. Furthermore, the expenses are required to be record in
the same period as the income to which it is associated(Parker and Fleischman, 2017).
(a) 4. Explaining the conventions and concepts relating to the consistency and material disclosure
Financial accounting framework comprises with the conventions which acts as the
guidelines that are required to follow while applying the principles of accounting practically.
The mandatory accepted conventions depends on practical facts and it renders the prominent
method or techniques to accountant for solving practical issues which are faced while preparing
the financial statements of business entity. Some conventions of Financial accounting are
mentioned underneath:
 Convention of consistency: It is mandatory for the organisation to follow the concepts
and conventions continuously and on consistent basis. As it is crucial for the final
accounts, it is essential for ascertainment of the organisation to analyse the performances
on the basis of comparative analysis. Besides this, it is also essential for the comparative
of different organisation of different countries, if all organisations follows the same
conventions an d concepts. As from the point of view of investors it is also beneficiary
for the investors to make comparative analysis of the organisation which follows same
accounting methodology and concepts(Collier, 2015). So it can be termed as
indispensable to precede accounting principles and rules in a familiar manner and on
consistently and continuously basis. As it ensure the reliability to the financial report. For
example, if an organisation adapted the method of Straight line method for depreciating
the fixed assets but after some years the organisation changes the method and follows the
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Written down value method (WDV) , then it becomes necessary for the organisation to
follow the WDV method consistently and continuously.
 Convention of material disclosure: Accordance with this convention, it is also required
that the organization must disclose all relevant informational data for the betterment of
the accounting procedure. Therefore the accounts are prepared in most prominent manner
that all material facts or information are required to disclose. It is also crucial for the
business entity to render all informational data in financial reports so that the investors,
creditors and owners becomes able to know about relevant business information related
to material. As it helps them in taking the further futuristic decisions and investment
decisions(Porter and Norton, 2012).
CLIENT1
(a) Journal Entry in the books of David Study
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(Being storage cost is paid)
02/0
1/18
Purchases A/c Dr. 7680
To S Hamid A/c 2450
To D Main A/c 2560
To W Tag A/c 1060
To R Foot A/c 1610
(Being goods purchases on credit from various parties)
03/0
1/18
J Wilson A/c Dr. 2020
T Cole A/c Dr. 1840
F Seema A/c Dr. 2380
6

J Allen A/c Dr. 990
P White A/c Dr. 2820
F Lane A/c Dr. 1170
To Sales A/c 11220
(Being goods sold on credit to various parties)
04/0
1/18
Motor Expenses A/c Dr. 670
To Cash A/c 670
(Being motor expense is paid)
07/0
1/18
Capital A/c Dr. 2000
To Cash A/c 2000
(Being cash withdrawal by owner himself)
09/0
1/18
T Cole A/c Dr. 1280
J fox A/c Dr. 2310
To Sales A/c
(Being goods purchase on credit with various parties)
11/0
1/18
Sale Return A/c Dr. 680
To J Wilson A/c 370
To F Seema A/c 310
(Being goods is returned back by the parties
16/0
1/18
Bank A/c Dr. 7150
7

Discount Allowed A/c Dr. 461
To P Mole A/c 1710
To F Lane A/c 3364
To J Wilson A/c 963
To F Seema A/c 1574
(Being Payment received from parties after allowing
discount @ 5%)
To Purchases Return A/c 110
(Being Goods is returned to creditor)
22/0
1/18
Purchases A/c Dr. 3140
To L Mole A/c 1330
To W Wright A/c 1810
(Being goods purchased on credit)
24/0
1/18
S Hamid A/c Dr. 3860
J Brown A/c Dr. 4260
R Foot A/c Dr. 1750
To Bank A/c 7500
To Discount Recieved A/c 2370
(Being payment is made to creditors after receiving discount
@ 10%)
27/0
1/18
Salaries A/c Dr. 14500
To Bank A/c 14500
(Being salaries are paid through cheque)
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30/0
1/18
Business Rates A/c Dr. 2220
To Bank A/c 2220
(Being business rates are paid through cheque)
(b) LEDGER ACCOUNTS
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10