Financial Accounting Report: Financial Statement Analysis and Clients

This financial accounting report delves into the core concepts of financial accounting, explaining its purpose and importance. It identifies and differentiates between internal and external stakeholders, highlighting how financial information is useful for each group. The report includes detailed analyses of financial data for multiple clients, encompassing journal entries, ledgers, and trial balances. It also presents financial statements such as the Statement of Profit and Loss and Financial Position. The report further explores key accounting concepts like consistency and prudence, along with the purpose and methods of depreciation. Through these elements, the report provides a comprehensive understanding of financial accounting practices and their application in various business scenarios.

Financial accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
A.......................................................................................................................................................1
Concept of financial accounting and its purposes.......................................................................1
Who are internal and external stakeholders and explain why financial information is useful....3
B.......................................................................................................................................................7
Client 1........................................................................................................................................7
Client 2......................................................................................................................................14
Client 3......................................................................................................................................17
Client 4......................................................................................................................................20
Client 5......................................................................................................................................20
CONCLUSION..............................................................................................................................22
REFERENCES ............................................................................................................................23

INTRODUCTION
Financial accounting is the management of financial data which helps in analysing
current position of company (Zeff, 2017). Study is based on different clients. Report will contain
concept of financial accounting and its purpose. It will prepare bank reconciliation statement,
trial balance, sales and purchase control account of different clients. Furthermore, it will explain
control account and suspense account.
A
Concept of financial accounting and its purposes
Financial Accounting is concerned with keeping track records of the financial
transactions of the organisations. As per standard framework recording of the transactions is
done than summarisation and thereafter represented in form of financial reports and financial
statement like income statement or balance sheet.
Companies are required to prepare financial statement on a regular basis. These Financial
statements are external as they are made for people outside the company, like stakeholders and
for the general public for enabling them to make decision. When the information is circulated in
public it will obviously reach to secondary recipients like customers, employees, competitors,
labour organisations etc (Ellwood and Newberry, 2016).
The motive behind preparation of the financial statement is not about reporting the value
of the company rather the purpose is of providing sufficient to outsiders so that they are able to
analyse and assess the valuation of the company. Guidelines for Standard framework are given
under Generally Accepted Accounting Principles which are used in every jurisdiction. It lays
down the standardised procedures rules and conventions that are required to be followed by the
accountants while recording the transactions and preparing the financial statements (Oulasvirta
and Bailey, 2016).
IFRS International Financial Reporting Standards is bundle of accounting standards
laying down how transactions are to be recorded in the books and reported in financial
statements. The above standards are given by International Accounting Standard Board. IFRS are

becoming widespread across borders. In financial reporting consistency is becoming a
prerequisite among the global organisations. Objective of financial accounting is to gain
resources from the outsiders like potential and existing investors, creditors, lenders to make
decisions by making available the financial information. Every company has to comply with the
following while preparing financial statements.
Relevance – financial accounting is used for making decisions. The accounting information
given by the financial accounts should be capable of influencing the decisions of the viewer.
Financial statement should be relevant and reliable enabling the viewers to take decisions
(Hayoun, 2018).
Materiality – Information given by the financial statement should be material there
should not be misstatement or omission as the users economic decisions depend on the financial
statements prepared by the organisations. Immaterial information should not be given in the
financial statements.
Reliability – organisations must ensure that the financial accounting done by them is
error free and unbiased. Managers should be able to rely upon the financial accounts prepared.
Information should not be moulded to fit in the relevance index as it would lose reliability.
Understandability – there should be clear expression by the accounting records about
every transactions recorded by it. Accounts should be understandable by the end users and the
target users for whom the statements have relevance.
Comparability – financial accounts and statements prepared by the organisations should
have the comparability with the statements of other enterprise. Stakeholders and other users
should be able to compare the statements with other entities for making decisions and coming at
a conclusion.
Purpose behind accounting are
Systematic record of transactions
the main purpose behind the accounting is to have a systematic record of the transactions which
is called book keeping (Edwards, Schwab and Shevlin, 2015). Thereafter the transactions are
classified and logically summarized for interpretations and for analysis

Ascertaining the results of recorded transactions
For getting the results of the operations carried by the enterprise profit and loss statement
is prepared by the organisations for particular periods. Profit and loss statement helps the
organisation and stakeholders to arrive at a decision. It also helps the organisations to take
corrective actions if the company's profit are declining (Kim and Zhang, 2016).
Ascertaining financial position of the enterprise
Owners are not only concerned with the profits of the enterprise but also its standing in
the market. Financial accounts are prepared by the enterprise for knowing the financial status of
the organisation. It also enable the users to make decision about their investments seeing the
financial statements.
Information for Rational decision making
Financial accounting is considered as the business language through which financial
results are communicated to the different organisations and various stakeholders of the
enterprise. Investors must be able to make decisions on the basis of the financial information
given by an enterprise (Demerjian, 2018).
For knowing the solvency status
Preparation of balance sheet and profit and loss account not only projects the wealth and
owning of the enterprise but is also relevant for knowing the capability of the organisations in
meeting its liability over the specific time frame. Knowing the solvency level is very important
for every organisation to make arrangements before it affects the functioning of the organisation
(Callen, 2015).
Who are internal and external stakeholders and explain why financial information is useful
Stakeholders are group of people who are affected by the financial reports of the
company. They are people who has stake in the company means they have invested in the
organisation. These all people are affected by the activities of the company. There are 2 types of
stakeholders i.e. internal and external (Types of stakeholders, 2019).

Internal stakeholders:
Internal stakeholders are people within the organisation i.e. employees, managers, owners
and investors. These people have interest in the financial information and are usually affected by
it. Employees, owners and investors need to have a look in the financial report because they want
to know the current position of the company and take decision to continue work here or leave the
organisation. Internal stakeholders want company to be successful (Brown and Jones, 2015).
 Employees: In the organisation, employees are stakeholders because they work for the
company to generate revenue. Employees are affected by the financial information of the
company because firm provides employment to them and if company does not perform
well, its financials report is negative which means business is in loss and cannot pay
salary to employees. Employees job may be in danger thus employees need to check the
financials so that they make correct decisions at right time. Workers need job security
Illustration 1: Types of stakeholders
(source: Types of stakeholders. 2019 )

and a share of profit for which they work hard (Weetman, 2019). By evaluating the
financials of the company they identify current position of the company by looking at
their cash flows.
 Investors: Investors are people who invest in large amount in the company. It is
necessary for them to evaluate the financial reports of the company in order to increase or
decrease the stake in the business. They may be termed as angel investors. Negative cash
flows affect the investors decision. They have right to analyse the financials to see the
performance of the company and if firm is not performing well then they will as
management of the company and pressure them. Investors have right to ask management
that where they are investing the money and what strategies managers are using to earn
profits. Investors will take their money back if company make losses. Thus financials of
organisation are useful for investors (Myers, 2016).
External stakeholders:
These are people who are outside the organisation but affected by the financial
information of the firm. These stakeholders are customers, suppliers, creditors, government and
society. These all people are affected in their business.
 Government: An organisation is monitored and controlled by the rules and policies of
the government. System need to know about the financial information because if
company earns profits than it pay tax to government. If company faces loss than company
is not able to pay tax, which affect authorities by reducing their earning. Business
provides job to the people, if company is in negative cash flow than there is chances of
increasing unemployment. Company also need to conduct its business ethically (Hayoun,
2018).
 Suppliers: Suppliers supply raw materials to the business to keep production in process.
Usually business rely on 1 or 2 suppliers who provide material to produce products. They
are affected by the financial information because if company is not earning well then
suppliers may switch to other company in order to earn profits. Company purchases raw
material in bulk but if firm is unable to generate profits then company may need to

dissolve. In this case supplier has high risk and may face loss. Thus financial information
is helpful for supplier to identify the upcoming problem company may face and take
strategic decisions (Zeff, 2017).
 Creditors: Creditors of business are financial institutions, banks and other individual
who provides credit to the business. Business borrows funds in order to grow its business
in different markets. Financial information is necessary for creditors to check the
liquidity position of the firm and find out whether organisation is able to pay the funds
back or not. Financials of the company provides relief to the creditors. If business is not
able to earn return on its investment and is bankrupt it affects the creditors.
 Customers: Customers depends on the company to supply product and services.
They help company in every purchase and guide business where to invest further.
Customers share their opinions and give feedback so that company work on their
products (Ellwood and Newberry, 2016). They request firm to make changes according to
the needs and preference. They need to access financial information because through the
information they make choice from where to purchase the product, is company providing
quality products, whether company is in loss etc. customers are affected by the financials
of the company, they see the current position which create a positive and negative image
which influence their decision making.
B
Client 1

A) Journal entries and Ledgers for January
Ledgers