Financial Accounting Homework: Scenario Analysis and Journal Entries

This document presents a comprehensive solution to a financial accounting homework assignment. The solution covers various aspects of financial accounting, including the documentation of business activities, journal entries, ledger accounts, and the preparation of financial statements. The assignment explores different forms of business transactions, such as sales, purchases, and payments, and explains the differences between single-entry and double-entry bookkeeping. It also highlights the importance of trial balances in checking accuracy and preparing financial statements. Furthermore, the solution delves into the concept of financial reporting and its users, discussing the role of financial statements in providing information for effective decision-making. The document also explains key accounting standards like the accrual principle, conservatism principle, and full disclosure principle. The solution includes examples of journal entries, ledger accounts, and a trial balance, demonstrating the practical application of accounting concepts. Overall, this assignment provides a detailed analysis of financial accounting principles and practices.

Financial Accounting

Contents
INTRODUCTION.......................................................................................................................................3
SCENARIO 1..............................................................................................................................................3
Question 1...............................................................................................................................................3
Question 2...............................................................................................................................................5
Question 3.............................................................................................................................................11
Question 4.............................................................................................................................................13
Question 5.............................................................................................................................................13
SCENARIO 2............................................................................................................................................15
Question 1.............................................................................................................................................15
Question 2.............................................................................................................................................16
Question 3.............................................................................................................................................17
Question 4.............................................................................................................................................17
Question 5.............................................................................................................................................19
CONCLUSION.........................................................................................................................................21

INTRODUCTION
Financial accounting is the practice of documenting, analyzing and presenting financial
operations and events that are at least partially financial in nature and analyzing results in a
meaningful manner. Financial accounting is an accountant professional department that ways of
measuring of cash operation inside a company (Aifuwa, Embele and Saidu, 2018). The
expenditures are registered, summarized and income tax or financial statement, including a cash
flow statement or a balance sheet, using structured guidelines. This report is decided by the
multiple tasks of documenting business activities in forms of papers, report, trial balance and the
creation of annual report for business organizations. This study also involved a bank audit in
order to determine if financial records are right or not.
SCENARIO 1
Question 1
There are various forms of business activities that have been used to document in the
accounting records and then further define the sum with which it is based. These are as follows:
 Sales transactions require the sale of the product to customers in return for cash or on
credit basis. Leading companies are a debit to money or accounts receivable and a credit
to the sales linked account in the sales reports.
 Purchases are the transactions that a business uses to buy the products or resources
required to attain the organization’s goals. Buys of products purchased in money resulted
in a debit to the accounting system and a money loan. Unless items were bought on credit
terms then the transaction would be paid, the debit would still be placed into the
accounting period and the reimbursement would be deposited into the debit account.
 Receivables are documents which occur within the organization paid for the receipt of
product to another company. The invoice exchange happens as a money debit and a credit
to the accruals in the seller's report (Appelbaum and et.al, 2017).
 Payments are transactions that distribute funds for either a product or service to a
business that is receiving money. People are reported in the accounting journal of the

business which enables the payment to be given as an amount received and a deduction to
the accounts payable.
Single entry bookkeeping
Single-entry bookkeeping would possibly only operate for company unless the company is quite
compact and easy, with low operation amount. Usually it's close to having your own personal
cheque book. When using single-entry book keeping it maintains a history of information such as
money, tax-deductible expenditures and tax payable.
Double entry bookkeeping
Many firms, including the survival of new companies, have double-entry bookkeeping for their
financial requirements. Two features of bookkeeping with double entry are how each ledger has
two columns but that expenditure is in different sides. By each payment, two transactions are
recorded-one debit in one bank and one credit from another (Ayres, Huang and Myring, 2017).
Trial balance and its importance
The trial balance is a worksheet in which all ledgers' accounts are integrated into the debit
and credit part quantities, and the amount is balanced against one another. The firm used to
regularly start preparing trial balance, usually at the end of the financial period. The trial balance
importance’s are as follows:
Checking reliability: This means that perhaps the trial balance was being used to verify the
actual number accumulated on the correct side of the current ledger while moving data from
various documents including such purchase records, writing records, cash books, etc. Trial
Balance other than consideration in accounting system, the authenticity of single purpose
financial statements is often essential to understand.
Helps in preparing financial statements: At end of each fiscal accounting year the income
statement, the balance sheet and the working capital should be updated. The amount of all the
funds that used prepare the financial reports is also available in the trial report, allowing the
financial details simple to prepare and understand (Bishop, DeZoort and Hermanson, 2017).

Rectifying errors: The cumulative debit of both balance sheet shall be equal to the trial
balance's aggregate credit. All this reviews booklet precision of the numerical. If that's not the
case, the accountant will notice the error and repair it. Additionally, professional accountants feel
satisfied when the debt balance total and the amount owed total are balanced.
Help in adjustments: Adjustment plans, such as payroll charges, retained bonds, closing needs
to share, etc., should be changed mostly during jury equilibrium development process. This
serves to create changes that are only significant in the existing year of financial reporting.
Businesses typically send the adjustment news stories at the close of the budget year. There is no
restriction to starting new changes transactions when people happen (Bolívar and et.al, 2018).
Question 2
Journal entries: A journal entry is being used to document a business arrangement in a
firm's accounting documents. In the accounting system, a journal entry is usually recorded;
conversely, it can be documented in a separate account, which is summarized and popped forth
into the accounting records. It uses the account balances to develop financial reports for the
company. The systemic guidelines of a journal entry would be that the journal entry must contain
a minimum of 2 budget items, and the actual number which gain entry in the debit column is
equal to the quantity tried to enter in the credit column.
Date Particulars Debit Credit
01-Jun Cash a/c Dr. 65000
To capital a/c 65000
(Being invest cash into
business)
02-Jun Purchase a/c Dr. 8000
To creditor a/c 8000
(Being purchase goods on
credit)
07-Jun Cash a/c Dr. 4000
To sales a/c 4000
(Being sell out inventory in
cash)
08-Jun Creditor a/c Dr. 4000

To Bank a/c 4000
(Being issue cheque for
purchase credit goods)
14-Jun Insurance a/c Dr. 75
To Bank a/c 75
(Being pay insurance amount
by cheque)
15-Jun Debtor a/c Dr. 12000
To Sales a/c 12000
(Being sell out inventory on
credit)
16-Jun Purchase a/c Dr. 10000
To Creditor a/c 10000
(Being purchase goods on
credit)
18-Jun Computer equipment a/c Dr. 3000
To Cash a/c 3000
(Being purchase computer
equipment)
20-Jun Rent a/c Dr. 150
To bank a/c 150
(Being paid rent by cheque)
21-Jun Cash a/c Dr. 10000
To sales a/c 10000
(Being sale inventory in cash)
25-Jun Cash a/c Dr. 100
To bank a/c 100
(Being withdraw amount from
bank)
30-Jun Stationary a/c Dr. 30
To cash a/c 30
(Being Purchase stationery into
cash)

Ledger Accounts:
An accounting ledger is an inventory or database used during income statement and balance
sheet activities to display record keeping documents. Financial reporting ledger log records may
also include items such as money, accounts receivable, savings, inventories, accounts payables,
accumulated expenditures and consumer transactions (Brusca and et.al, 2016). Financial
reporting documents are established for all forms of payments in the balance sheet and the
income statement. Balance sheet transactions contain holders of properties such as money or
receivable accounts. Financial statement transactions contain such items as profits and
expenditures.

Trial balance:
Trial balance
Particulars Dr. Cr.
Capital account 65,000
Cash account 76,070
Purchase account 18,000
Creditors 14,000
Sales 26,000
Bank overdraft 4,325
Insurance 75
Rent 150
Stationary 30

Debtor 12,000
Computer equipment 3,000
109,32
5
109,32
5
Question 3
Financial reporting is a process of primary interface staff with information in order to
make effective decisions and the income report is the result of the financial reports. That is the
main distinction between financial reporting and accounts. Financial statements have been
prepared over a specific accounting period, usually for one year. This accounting period is linked
to as a 'financial year' and is different from a schedule period, because the financial statement
may vary depending on the situation of the organisation or business (Gotti, 2016). Financial
Statements are meant to even provide data on business situation, working capital and operating
performance. This process helped those statements' viewers make planning and decision. These
reports seek to identify commodity use, cash flow, corporate reputation and the company's
financial wellbeing. This allows traders and individuals make better decisions as to how the
company should be managed.
The concepts "financial report" and "financial statement" are considered synonymous, not
even in the same way. "Financial report" is a paragliding concept that underlies so many kinds of
reporting. This one study which comes under the umbrella of the financial report is the income
reports. In many other sentences, all annual reports are accounting standards, but the income
accounts may not all be.
Requirement of financial reports and its users:
According to the GAAPs, organizations are paying for trying to report on their retained
earnings, profit-making operational efficiency economic policies. The preceding 3 major
financial statements must be prepared underneath the GAAP, including such statement of
comprehensive income, balance sheet and statement of working capital. Even without heavy
price of updating their GL or ERP, financial reporting system can be combined with the current
general ledger, offering solid and current incorporated analyses. When the firm has built the right