Financial and Managerial Accounting ACC202 Assignment, July 2019

This document presents a comprehensive solution to a Financial and Managerial Accounting assignment (ACC202), covering key aspects of accounting principles and practices. The solution includes detailed journal entries, a balance sheet, and an income statement, demonstrating the application of accounting concepts. It addresses inventory valuation using both FIFO and weighted average methods, comparing their impact on gross profit. Furthermore, the assignment delves into accounting principles such as the cost principle, conservative principle, full disclosure principle, and accrual principle, providing a real-world example using Jardine Matheson. The solution also includes a discussion on the application of these principles in the context of financial reporting standards like IFRS.

Running Head: Financial and Managerial Accounting 1
Financial and Managerial Accounting

Running Head: Financial and Managerial Accounting
Table of Contents
Question 1.............................................................................................................................................3
A)......................................................................................................................................................3
B).......................................................................................................................................................3
C).......................................................................................................................................................3
Question 2.............................................................................................................................................4
A)......................................................................................................................................................4
B).......................................................................................................................................................6
Question 3.............................................................................................................................................7
Introduction...........................................................................................................................................7
Accounting principles and concepts......................................................................................................7
Conclusion...........................................................................................................................................10
References...........................................................................................................................................11

Running Head: Financial and Managerial Accounting
Question 1
A)
Transactions Basis
Note Payable Loan taken for running the business
Supplies For stock lying in the warehouse
Cash For purchasing the goods or making payment
of notes payable
Accounts receivables The sales made to the customers
Accounts Payables The goods purchased on credit
B)
Journal entry of the transactions
Date Account Name Post Ref. Debit Credit
Cash a/c Dr. 55000.00
Supplies a/c Dr. 2000.00
Accounts receivables Dr. 5000.00
To Accounts payable 2200.00
To notes payable 50000.00
To profit and loss a/c 9800.00
for journal entry passed
Profit and loss a/c Dr. 200.00
To utility expenses 200.00
for expenses made
Sales a/c Dr. 10000.00
To profit and loss a/c 10000.00
for sales made
Total 72200.00 72200.00
C)
Parc design
Balance sheet
as at 31st January 2019
Account Amount Amount
Assets
Current Assets
Cash 55000.00
Accounts Receivable 5000.00
Supplies 2000.00

Running Head: Financial and Managerial Accounting
Total Assets 62000
Liabilities
Capital, Stains 9800.00
Add: Net profit 9800.00
Long term Borrowings
Note Payable 50000.00
Short term borrowings
Accounts Payable 2200.00
62000.00
Total liabilities and Shareholders’ Equity 62000.00
Parc design
Income Statement
(for the year ending 31st January 2019)
Account Amount Amount
Revenue
Sales Revenue 10000
Total 10000
Total revenue 10000
Expenses
Utility Expenses 200
Total expenses 200
Net profit / Loss 9800
Question 2
A)
FIFO
Purchases Sales Balance
Date
Uni
ts Cost Total
Uni
ts Cost Total Units Cost Total
Jan 1 50
$
120
$
6,000
Jan 3 60
$
130
$
7,800 60
$
130
$13,8
00
Jan 5 40
$
120
$
4,800
$
9,000
10
$
120
$
1,200

Running Head: Financial and Managerial Accounting
60
$
130
$
7,800
Jan
10 100
$
150
$
15,000
1
00
$
150
$15,0
00
Jan
12 10
$
120
$
1,200
20
$
130
$
2,600 40
$
130
$
5,200
1
00
$
150
$15,0
00
Jan
20 40
$
130
$
5,200
40
$
150
$
6,000 60
$
150
$
9,000
Tota
ls 160
$
22,800 150
$19,8
00 60
$
150
$
9,000
Weighted Average
Purchases Sales Balance
Date
Uni
ts Cost Total
Uni
ts Cost Total Units Cost Total
Jan 1 50
$
120
$
6,000
Jan 3 60
$
130
$
7,800 60
$
130
$
7,800
1
10
$
125
$13,8
00
Jan 5 40
$
125
$
5,000 70
$
126
$
8,800
Jan
10 100
$
150
$
15,000
1
00
$
150
$15,0
00
1
70
$
140
$23,8
00
Jan
12 30
$
140
$
4,200
1
40
$
140
$19,6
00
Jan
20 80
$
140
$11,2
00 60
$
140
$
8,400

Running Head: Financial and Managerial Accounting
Tota
ls 160
$
22,800 150
$20,4
00 60
14
0
$
8,400
B)
The major difference in the gross profit under the FIFO method and the weighted average is
because of the change of the method of the cost per unit. Under the FIFO method which is
also known as the First in first out method the units are sold at the price in contrast to the first
units purchased, whereas in case of the weighted average cost of capital the units price is
calculated by dividing the total cost by total units. In this manner the major impact is on the
cost of goods sold. Hence the cost of goods sold is greater in FIFO method in comparison to
the weighted average cost method and so will be he profit or the loss.

Running Head: Financial and Managerial Accounting
Gross profit
FIFO Weighted Average
Revenues $ 8,000 $ 8,000
Cost of goods sold $ 9,000 $ 8,400
Gross profit $ (1,000) $ (400)
Question 3
Introduction
The description analyses the accounting principles and concepts by using a relevant example
named as “Jardine Matheson.” The company is a standard listed under LSE (London stock
exchange) (Jardine Matheson, 2018). This description brings out analyses of four significant
principles of accounting that are used in the formation of financial statements. As per the
GAAP (generally accepted accounting principles), it is seen that companies have to comply
with the legal requirement and compliances (Wildavsky, Lockhart, & Coughlin, 2018).
Accounting principles and concepts
Accounting principles are few rules and regulations, which a company will follow as per the
reported financial data. Principle of accounting refers to the basic and fundamental principle
including cost principle, going concern principle, full disclosure principle, and economic
entity principle (Wildavsky, Lockhart, & Coughlin, 2018).
Four important concepts
Cost principle- According to this principle, an organisation will record only assets, equity
investments, and liabilities at their book value or purchase cost. The accounting principle is
relevant from the cost perspective where cost is defined as amount spent related to cash and
cash equivalent as when it is originally obtained whether the purchase has been incurred last
year or 40 years back (Ismail, & Sori, 2017). This is the reason why amounts illustrated in the
financial statements is referred as historical cost. Asset amount is not adjusted upward
according to inflation (Jardine Matheson, 2018).

Running Head: Financial and Managerial Accounting
For the cost principle, one has tested discounted cash flows models as being used by the
management in the assessment as checking the accuracy of calculations (Ismail, & Sori,
2017). Comparing the historical budgeting performance in relation to the actual results and
agreeing to the figures as being detailed management as being approved in order to assess the
cash flows in model (Jardine Matheson, 2018).
Conservative principle- The concept will record liabilities and expenses and financial
statements will record revenue and assets only when they are incurred. When a situation
arises, there are two acceptable alternative in order to report item where conservatism directs
accountant resulting into less net income and less amount of assets (Ismail, & Sori, 2017). It
directs the accountants to presume the future losses and risks according to environment but at
the same time, it cannot allow treat the gain same action as risk and losses. For instance- An
accountant can write the value of inventory as an amount, which is lower than the original
cost but it will not write the inventory amount as up to such higher amount as compared to its
original costs.
The company simply applies appropriate measurement simplified approach in order to expect
credit losses. It is seen from the annual reports of Jardine Matheson, it expected its loss
allowance for the trade debtors and the contract assets. In order to measure expected credit
losses, the company estimates its shared credit risk, trade receivable, contract assets, and also
the past due for it (Jardine Matheson, 2018). The expected loss is based on the historical
payment sales profiles and its corresponding for the historical credit losses. The historical
loss will reflect the adjustment of forward looking data and current fluctuation on the factors
of macro-economic factors.
Full disclosure principle- Certain information is quite important for the investors and lenders
with the use of financial statements. In order to accomplish this principle, financial

Running Head: Financial and Managerial Accounting
statements maintain notes to accounts “footnotes” as being attached to the financial data. It is
a concept inclusive of appropriate information alongside within the financial statements about
the data, which affect reader’s understanding of the financial Statements. The concept covers
specifying the enormous number of data disclosures (Ismail, & Sori, 2017).
This concept is purely useful for the investors to analyse the performance of the company.
The group analyses underlying profits in the internal financial reporting to differentiate
between non-trading items and the ongoing performance for business. The company
announced several additional disclosures made in the financial statements as mainly on the
revenue form the contracts and impairment of debtors (Flood, 2015). IFRS 17 in regards to
insurance contracts have comprehensive policies and standards as a fundamental overhauling
insurance recognition, accounting, disclosures, and presentation. It needs insurance of
contract liabilities as being reported balance sheet by using the current assumption at the
reporting time. The company discloses the presentation in corporate governance disclosing
cross reference from the financial reporting and audited (Jardine Matheson, 2018).
Accrual principle- This concept states that accounting transactions must be recorded as per
the accounting periods when it is incurred rather than periods and its associated cash
generated (Sikka, 2017). It is crucial to form financial statements as shown if happened in the
fiscal period rather than recording artificial cash revenues just to accelerate the estimated
cash flows (Sikka, 2017). This principle is used to record expense for which the company has
paid for through which incorporated lengthy delaying caused to the payment, which is
associated with supplier invoice (Jardine Matheson, 2018).
With the changes in the accounting policies, there is an adoption of IFRS 9 inclusive of
financial instrument and also IFRS 15 “revenue from the contracts with the customers” in the
financial statements. Residences and revenue from the hotels branding and management

Running Head: Financial and Managerial Accounting
comprises of gross fees as being earned from branding. This management fees is determined
by relevant contract, accounting performance of hotels, operating and sales expense of
residences. Residences and hotel invoices is according to terms of contracts and fees that are
payable when being invoiced (Jardine Matheson, 2018).
Conclusion
From the above discussion, it is seen that financial statements are prepared as per the IFRS
(International Financial Reporting Standards) including IASB (International Accounting
Standards Board). The statements are prepared on the basis of going concern and also under
the historical costing convention while disclosing the accounting procedures and policies.

Running Head: Financial and Managerial Accounting
References
Flood, J. M. (2015). Wiley GAAP 2016: Interpretation and Application of Generally
Accepted Accounting Principles. John Wiley & Sons.
Ismail, N., & Sori, Z. M. (2017). A closer look at accounting for Islamic financial
institutions. In SHS Web of Conferences (Vol. 34, p. 07004). EDP Sciences.
Jardine Matheson, (2018). Annual Report 2018. Retrieved from:
https://www.jardines.com/assets/files/Investors/Reports/matheson/jm-ar2018.pdf
Sikka, P. (2017, December). Accounting and taxation: Conjoined twins or separate siblings?.
In Accounting forum (Vol. 41, No. 4, pp. 390-405). Taylor & Francis.
Wildavsky, A., Lockhart, C., & Coughlin, R. M. (2018). Accounting for the Environment 1.
In Culture and Social Theory (pp. 85-112). Routledge.