Financial Accounting Assignment: Comprehensive Analysis and Reporting

This financial accounting assignment solution delves into fundamental concepts and practical applications. It begins with an overview of business transactions, categorizing them as cash/credit and internal/external, and then contrasts single-entry and double-entry accounting systems. The solution includes detailed journal entries, ledger accounts, and a trial balance for a given month, demonstrating the accounting cycle. It further explains financial statements and reports, their purposes, and the various users of financial information. The assignment also covers core accounting principles, such as matching, materiality, cost, accrual, full disclosure, revenue recognition, and going concern. Finally, it presents an income statement illustrating revenue, cost of goods sold, and gross profit calculations, providing a comprehensive understanding of financial accounting principles and their practical application.

FINANCIAL ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
SCENARIO 1..............................................................................................................................................3
Question 1...............................................................................................................................................3
Question 2...............................................................................................................................................4
Question 3.............................................................................................................................................11
Question 4.............................................................................................................................................12
Question 5.............................................................................................................................................13
Question 6.............................................................................................................................................15
Question 7.............................................................................................................................................17
SCENARIO 2............................................................................................................................................18
Question 1.............................................................................................................................................18
Question 2.............................................................................................................................................19
Question 3.............................................................................................................................................20
Question 4.............................................................................................................................................20
Question 5.............................................................................................................................................22
CONCLUSION.........................................................................................................................................24
REFERENCES..........................................................................................................................................26

INTRODUCTION
The Financial Accounting refers to the cycle of recording, summing up and dissecting the
financial exchanges to have productive decision making methodology. In the current situation,
there is essential prerequisite to acquire upper hands through creating efficient accounting
procedures for having useful practices in industry to lead the organization from comparative
association. The current report incorporates the depiction in regards to various business
transactions, different types of accounting framework, trail balance, contrast between financial
statements and the reporting along with other basic financial accounting concepts. In addition to
this, it provides an insight into creation of journal, ledger, cash flow statement or the
reconciliation statement.
MAIN BODY
SCENARIO 1
Question 1
Business transactions mainly refers to the exchange of the goods and services among the
two parties which helps in meeting up the desired organizational goals and objectives. The
business transactions can be classified into the two types: which are Cash and credit transactions
and internal and external transactions. The former one involves both cash and credit business
transactions. The event when the cash is paid or received immediately when the transaction
occurs, it is called cash transaction. On the other hand, credit transaction refers to the event when
the cash is not paid or received immediately but the transaction happens and the payment is done
in the future specified date is called as the credit transaction (Business transaction. 2020). The
internal transaction are those business transactions in which there is no external parties involved.
These exchanges don't include in the trading of values between two groups yet the
eventcomprises the exchange is quantifiable in money related terms and effects the monetary
situation of the business. Instances of such exchanges incorporate chronicle devaluation of fixed
resources and understanding the deficiency of resources brought about by fire and so on. On the
other side, external transactions are those which involves exchange of value with the third
parties. Mainly all the transactions excluding internal transactions are external only and accounts

for the usual transactions of the business. For instance, purchase of material from suppliers,
utility bills, payment of rent or salaries to employees and so forth.
A single-entry accounting framework records each bookkeeping exchange with a single
section to the bookkeeping records, as opposed to the more normal two-fold section framework.
The single accounting framework is focused on the aftereffects of a business that are accounted
for in the pay proclamation (Single- Vs. Double-Entry Bookkeeping. 2019). The center data
followed in a single-entry framework is cash payment and money receipts. The main form of
recording in this system is the cash book.In double entry bookkeeping accounting, the
transactions are recorded on two sides, debit and credit. This results into maintaining the
accuracy of the bookkeeping, reducing errors and omissions.it is used by all the business
organizations.
The trial balance refers to the statement which provides the balancing figures of all the
ledger accounts (Trial Balance. 2020). The main purpose behind creating trial balance is to
ensure mathematical accuracy. This is further used for the purpose of creating the financial
statements which involves the income statement, balance sheet, cash flow statement.
Question 2
1. Journal Entries for the month of June 2016
Date Particulars L.F Debit Credit
1-Jun Cash A/C Dr. 65000
To Capital A/C 65000
(Being capital invested for
starting company)
2-Jun Purchase A/C Dr. 8000
To Trade payables A/C 8000
(Being goods purchased on
credit)
7-Jun Cash A/C Dr. 4000
To Sales A/C 4000

(Being goods sold for cash)
8-Jun
Trade payables A/C
Dr. 4000
To Bank A/C 4000
(Being cheque issued to pay
creditors)
14-Jun
Prepaid Insurance A/C
Dr. 75
To Bank A/C 75
(Being prepaid insurance
expenses paid )
15-Jun
Trade receivables A/C
Dr. 12000
To Sales A/C 12000
(Being goods sold on credit)
16-Jun Purchase A/C Dr. 10000
To Trade payables A/C 10000
(Being goods purchased on
credit)
18-Jun
Computer Equipment A/C
Dr. 300
To Cash A/C 300
(Being computer equipment
purchased by paying in
cash)

20-Jun Prepaid rent A/C Dr. 150
To Bank A/C 150
(Being prepaid rent paid )
21-Jun Cash A/C Dr. 10000
To Sales A/C 10000
(Being goods sold for cash)
25-Jun Cash A/C Dr. 100
To Bank A/C 100
(Being amount withdrawn
from bank for keeping it into
petty cash)
30-Jun Stationary A/C Dr. 30
To Cash A/C 30
(Being stationary purchased
for taking money from petty
cash)
2. Ledger accounts
Capital A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
30-Jun To balance c/d 65000 1-Jun
By Cash
A/c 65000
65000 65000

Purchase A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
2-Jun To trade payables A/c 8000
16-Jun To trade payables A/c 10000 30-Jun
By balance
c/d 18000
18000 18000
Bank A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
8-jun
By Trade
payables
A/c 4000
14-Jun
By prepaid
insurance
A/c 75
20-Jun
By prepaid
rent A/c 150
30-Jun To balance c/d 4325 25-Jun
By Cash
A/c 100
4325 4325

Trade receivables A/C
Date Particulars J.F. Amount Date Particulars J.F. Amount
15-Jun To Sales A/c 12000 30-Jun
By balance
c/d 12000
12000 12000
Cash A/C
Date Particulars J.F. Amount Date Particulars J.F. Amount
1-Jun To Capital A/C 65000 18-Jun
By Computer
Equipment A/C
Dr. 300
7-Jun To Sales A/C 4000
21-Jun To Sales A/C 10000 30-Jun By Stationary A/C 30
25-Jun To Bank A/C 100 30-Jun By balance c/d 78770
79100 79100
Trade payables A/C
Date Particulars J.F. Amount Date Particulars J.F. Amount
8-Jun To Bank A/c 4000 2-Jun
By Purchase
A/c 8000
30-Jun To balance c/d 14000 16-Jun
By Purchase
A/c 10000
18000 18000

Sales A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
7-Jun
By Cash
A/c 4000
15-Jun
By trade
receivables
A/c 12000
30-Jun To balance c/d 26000 21-Jun
By Cash
A/c 10000
26000 26000
Computer Equipment A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
18-Jun To Cash A/c 300 30-Jun
By balance
c/d 300
300 300
Prepaid Rent A/c

Date Particulars J.F. Amount Date Particulars J.F. Amount
20-Jun To Bank A/c 150 30-Jun
By balance
c/d 150
150 150
Stationary A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
30-Jun To Cash A/c 30 30-Jun
By balance
c/d 30
30 30
Prepaid insurance A/c
Date Particulars J.F. Amount Date Particulars J.F. Amount
14-Jun To Bank A/c 75 30-Jun
By balance
c/d 75
75 75
3 Trial Balance:
Particulars Debit Credit
Cash A/c 78770
Sales A/c 26000

Bank A/c 4325
Capital A/c 65000
Purchase A/c 18000
Trade payables A/c 14000
Stationary account 30
Prepaid Insurance A/c 75
Prepaid Rent A/c 150
Trade receivables A/c 12000
Computer Equipment A/c 300
Total 109325 109325
Question 3
The financial statements and reports are broadly utilized as conversely for meeting the
assortment of business targets. Financial Reporting (FR) contains the assertions like pay, income
explanation, accounting report, and so forth.The motivation behind financial reportingis to figure
out the performance of the business and gaining better insight into the true and fair financial
position and performance of the entity. In addition to this, it helpsin determining whether the
fundamental goal and objective for the particular year is attained or not. FRs are broadly ready
on the quarterly and yearly premise to comply with its lawful commitments (Financial
Statements vs. Financial Reports – What’s the Difference? 2020). Financialstatementsare defined
to give data in regards to organization's present situation to a few partners. The purpose for
making financial statements to provide the management of the entity to have adequate
understandability of organization's present position. It helps organization to achieve capacity to
make dependable upgrades through correcting blunders and lacking regions on fitting time which
helps in acquiring upper hands in industry.
The financial reporting is utilized to give information to the users of it based upon
which meaningful business related decisions are being undertaken. This is helpful in gathering an
understanding pertaining to the financial condition, dependability, and so on there are a few sorts
of partners who are keen on using the data whichresults in making effective business decisions.

There are number of users of the financial reports which are both internal and external to the
business. They are all together called as the stakeholders of the company. The users of the
financial reportcomprise of representatives, proprietors, suppliers, vendors, financial backers,
financial organizations, analyst, banks, customers, government organizations and so on, that are
identified with either interior or outer business environment. The primary motivation behind
financial institution like banks is to used given data is to have capacity to detail compelling
dynamic.
Question 4
Accounting principles are important for the smooth functioning of enterprise so that
effectual decision making can be exerted by company for formulating systematic procedure. The
accounting principles give guidance to company for having desirable financial health. It includes
accrual, matching, conservatism, materiality, etc.
 Matching principle is concerned with recording expenses of company at the same time
when the revenue has been generated (Kimmel, Weygandt and Kieso, 2018). It is one of
the most important fundamental principle that gives instructions to organization that there
should be appropriate balance in these both in order accurate position of liquidity can be
ascertained. It gives several benefits like smooth and organized business processing with
significant knowledge of in and out going.
 Materiality Principle says that accountings standard can be neglected if does not have
much impact on the processing of company. The purpose behind this is to make
organizational processing effectual and smooth through removing irrelevant obstacles via
reducing inappropriate practices. It is basically related with making business aware of
recording all information that can make the financial statement material. It helps
company to gain trustworthiness and effectiveness in industry.
 Cost principle states that assets should be recorde at the sometime when it has acquired to
get significant alertness of actual amount spend on that. There is guidance to avoid
considering market value through executing changes in busies practices transaction. It is
concerned with taking all expenses which are actually incurred in particular period of
time. This gives properly instructions to have information regarding the current
requirements of funds.