Financial Accounting: Journal Entries, Ledgers, Trial Balance

This document presents a complete solution to a financial accounting assignment, covering key concepts and practical applications. The assignment involves preparing journal entries, general ledgers, and trial balances for a consulting business, as well as constructing final accounts, including trading, profit and loss accounts, and balance sheets, for sole trader, partnership, and limited company scenarios. The solutions demonstrate the application of accounting principles, such as double-entry bookkeeping, depreciation, and adjustments for closing stock and outstanding expenses. The document provides detailed workings and financial statements for each business type, offering a valuable resource for students studying financial accounting and seeking to understand the preparation of financial reports for various business structures. The document also includes a comprehensive analysis of the trial balance and adjustments, crucial for accurate financial reporting.

Financial Accounting
The specific branch of accounting which involves a process of recording, reporting and
summarizing the multiple the transaction result. Financial accounting is more based on
double entry system. Financial accounting provides aggregate and collective information for
the company. The data and information under financial accounting are historical in nature.
(Kenton, 2019)
Double Entry Bookkeeping System
The double entry bookkeeping system is the business transactions, amounts which must be
recorded in minimum of two accounts. It is used to satisfy the accounting equation:
Assets= Liabilities + Equity (Hayes, 2019)
Question:
Advertising company owned by Mr. Ashu Malla provides advertising consulting services.
During January 2012, the following events occurred:
Jan 1 Owner contribute $ 50000 and a new computer costing $20500 to start his business.
Jan 3 Office suppliers were purchased on account for $4000.
Jan 8 Company obtained 12% 5-year loan of $ 20000 from the bank.
Jan 13 Company paid the utility bills for $ 2750.
Jan 16 $ 3000 was paid in Accounts Payable from the purchase of office supplies on Jan 3.
Jan 18 Advertising services completed in January were billed to clients Mira’ Flowers at $
18300.
Jan 20 Advertising received $ 5500 from Mira’ Flowers, a client as payment on account.
Jan 25 Mr. Ashu Malla withdraw $ 6000 of cash for personal use.
Prepare Journal Entry, General Ledger Account and make a Trial Balance.

Solution:
Date Particulars Ref Amount (Dr.) Amount (Cr.)
Jan 1 Cash a/c
Computer a/c
To owner’s equity Mr. Ashu Malla
(Being business started with cash and
computer)
50000
20500
70500
Jan 3 Office Suppliers a/c
To Account Payable a/c
(Being office suppliers purchase on
credit)
4000
4000
Jan 8 Cash a/c
To Bank loan a/c
(Being bank loan obtained)
20000
20000
Jan 13 Utility Bills a/c
To Cash a/c
(Being utility bill paid)
2750
2750
Jan 16 Account Payable a/c
To Cash a/c
(Being paid partial account payable)
3000
3000
Jan 18 Account Receivable Mira’ Flower a/c
To Advertising service a/c
(Being bill paid to customer for
service earned)
18300
18300
Jan 20 Cash a/c
To Account Receivable Mira’
Flowers
(Being cash received from customer
billed previously)
5500
5500
Jan 25 Drawing a/c
To cash a/c
(Being cash withdraw by owner)
6000
6000
Total $ 130050 $ 130050

General Ledger
General ledger means the record of financial data with debit and credit account records
validated by a trial balance. It provides a record of each financial transaction which takes
place during the life of an operation. (Clarke, 2014)
Above transaction are recorded in General Ledger.
Dr. Cash Account Cr.
Date Particulars Amount
($)
Date Particulars Amount
($)
Jan 1 Owner’s Equity a/c 50000 Jan 13 Utility Bill a/c 2750
Jan 8 Bank Loan a/c 20000 Jan 16 Account Payable a/c 3000
Jan 20 Account Receivable a/c 5500 Jan 25 Drawing a/c 6000
By, Balance c/d 63750
Total 75500 Total 75500
Feb 1 To, Balance b/d 63750
Dr. Computer Account Cr.
Date Particulars Amount
($)
Date Particulars Amount
($)
Jan 1 Owner’s Equity a/c 20500
By, Balance c/d 20500
Total 20500 Total 20500
Feb 1 To, Balance b/d 20500
Dr. Owner’s Equity Account Cr.
Date Particulars Amount
($)
Date Particulars Amount
($)
Jan 1 Cash a/c 50000
Jan 1 Computer a/c 20500
To, Balance c/d 70500
Total 70500 Total 70500
Feb 1 By, Balance b/d 70500

Dr. Office Suppliers Account Cr.
Date Particulars Amount
($)
Date Particulars Amount
($)
Jan 3 Account Payable a/c 4000
By, Balance c/d 4000
Total 4000 Total 4000
Feb 1 To, Balance b/d 4000
Dr. Account Payable Account Cr.
Date Particulars Amount
($)
Date Particulars Amount
($)
Jan 16 Cash a/c 3000 Jan 3 Office Suppliers 4000
To, Balance c/d 1000
Total 4000 Total 4000
Feb 1 By, Balance b/d 1000
Dr. Advertising Service Account Cr.
Date Particulars Amount
($)
Date Particulars Amount
($)
Jan 18 Account Receivable a/c 18300
To, Balance c/d 18300
Total 18300 Total 18300
Feb 1 By, Balance b/d 18300
Dr. Bank Loan Account Cr.
Date Particulars Amount
($)
Date Particulars Amount
($)
Jan 8 Cash a/c 20000
To, Balance c/d 20000
Total 20000 Total 20000
Feb 1 By, Balance b/d 20000

Dr. Utility Bills Account Cr.
Date Particulars Amount
($)
Date Particulars Amount
($)
Jan 13 Cash a/c 2750
By, Balance c/d 2750
Total 2750 Total 2750
Feb 1 To, Balance b/d 2750
Dr. Account Receivable Account Cr.
Date Particulars Amount
($)
Date Particulars Amount
($)
Jan 18 Advertising Service a/c 18300 Jan 20 Cash a/c 5500
By, Balance c/d 12800
Total 18300 Total 18300
Feb 1 To, Balance b/d 12800
Dr. Drawing Account Cr.
Date Particulars Amount
($)
Date Particulars Amount
($)
Jan 25 Cash 6000
To, Balance c/d 6000
Total 6000 Total 6000
Feb 1 To, balance b/d 6000

Trial Balance
Trial balance is a summary of the business activities. Trial balance is a sheet recording all the
ledger balances which are categorized into debit and credit. It records the transaction and
summarize them into ledger and create a worksheet and classify the ledgers is a trial balance.
With the help of general ledger, trial balance is prepared below:
Trial Balance
S.N Particulars Ref Amount (Dr.) Amount (Cr.)
1 Cash a/c 63750
2 Computer a/c 20500
3 Owner’s Equity a/c 70500
4 Officer Suppliers a/c 4000
5 Account Payable a/c 1000
6 Advertising Service a/c 18300
7 Bank Loan a/c 20000
8 Utility Bills a/c 2750
9 Account Receivable a/c 12800
10 Drawing a/c 6000
Total 109800 109800

Sole Trading
Self-employed person who owns and runs their own business as an individual is known a sole
trading company. It is a simple form of business structure and is relatively easy and
inexpensive to start up. These kinds of business doesn’t have any legal identity. (Korchak,
2019)
Final Account of sole-traders company:
Question:
The following trial balance of Mr. Shyam prepare the trading account, profit and loss account
and balance sheet for the year ended 31st December 2015.
Trial Balance as on 31st December 2015
S.N. Particulars Re
f
Amount (Dr.) Amount (Cr.)
1 Capital a/c 325000
2 Purchase a/c 215000
3 Opening Stock a/c 55000
4 Sales a/c 485000
5 Freight Inward a/c 20000
6 Salaries a/c 105000
7 Trade Payables a/c 95000
8 Trade Receivable a/c 105000
9 Furniture a/c 175000
10 Administration Expenses a/c 75000
11 Sales Return a/c 6000
12 Purchase Return a/c 10000
13 Discounts a/c 9500 4500
14 Investment a/c 50000
15 Bad Debts a/c 2500
16 Cash in Hand a/c 93500
Total 915500 915500
Requirement:
a. Closing stock $ 90000.
b. Depreciation on Furniture @10%.

Solution
Trading Account
For the year ended 31st December 2015
Particulars Amount ($) Particulars Amount ($)
To, Opening stock a/c
To, purchase a/c 215000
Less: Purchase return a/c
(6000)
To, Freight Inward a/c
To, Gross Profit a/c
55000
209000
20000
281000
By, sales a/c 485000
Less: Sales Return a/c
(10000)
By, Closing Stock a/c
475000
90000
565000 565000
Profit and Loss Account
For the year ended 31st December 2015
Particulars Amount
($)
Particulars Amount ($)
To, Salaries a/c
To, Administrative Expenses
a/c
To, Discount Allowed a/c
To, Bad Debts a/c
To, Depreciation a/c @10%
To, Net Profit a/c
105000
75000
9500
2500
17500
76000
By, Gross Profit b/d
By, Discount Received a/c
281000
4500
285500 285500

Balance Sheet
As at 31st December 2015
Liabilities Amount
($)
Assets Amount ($)
Capital a/c 325000
Add: Net Profit a/c 76000
Trade Payable a/c
401000
95000
Furniture a/c.
175000
Less: Depreciation a/c
@10% (7500)
Cash in Hand a/c
Closing stocks a/c
Trade Receivable a/c
Investment a/c
157500
93500
90000
105000
50000
496000 496000
Partnership Company
In partnership companies a formal arrangement is done between two or more parties to
manage and run a business and share its profit and loss equally. There are several types of
partnership company with different arrangement. There may be tax benefits to a partnership
compared to any other corporation. (M.KOPP, 2019)
Final Account of partnership company:
Question
Trial Balance of Mr. Arun and Barun is given below, now prepare Trading and Profit and
Loss Account for the year ended 31st December 2010 and Balance Sheet as on that Date.
Trial Balance
As on 31st December 2010
S.
N
Particulars Ref Amount(Dr.) Amount (Cr.)
Capital a/c's -Arun 60000

- Barun
Purchase a/c
Sales a/c
Sundry Debtors a/c
Sundry Creditors a/c
Commission
Bills Receivable a/c
Bills Payable a/c
Commission
Opening Stock a/c
Wages
Investment
Postage and Telegrams
Insurance
Plant And Machinery
Furniture
Cash in Hand
Carriage
Bad Debts
Prepaid Rent
Salaries
46700
28000
4600
5000
4600
18000
9900
13500
3600
1200
40700
18000
2500
3200
400
7000
10500
35000
85000
25000
1800
6000
1800
212800 212800
Requirements:
1. Closing stock is Rs. 31000.
2. Wages Rs. 1400, salaries Rs. 800 were outstanding expenses.
3. Depreciation of Plant and Machinery by 10%.
4. Rs. 500 is paid as an advance foe insurance.
5. Rs. 1500 bad debts needs to be provided.
6. Rs. 1200 is due and not received as commission.

Solution:
In the books of Arun and Barun
Trading & Profit and Loss A/c
For the year ended 31st December 2010
Particulars Amount
(Rs)
Amount
(Rs)
Particulars Amount
(Rs)
Amoun
t(Rs)
To, Opening Stock a/c
To, Purchase a/c
To, wages
Add: o/s wages
To, Carriage
To, Gross Profit c/d
9900
1400
18000
46700
11300
3200
36800
By, Sales a/c
By, Closing Stock
85000
31000
116000 116000
To, Salaries a/c
Add: o/s salaries
To, Commission
To, Postage and
Telegram
To, Insurance
Less: Advance
To, Bad Debts
Add: New Bad Debts
To, Depreciation
Plant and Machinery
To, Net Profit c/d
10500
800
1200
500
400
1500
11300
4600
3600
700
1900
4070
By, Gross Profit b/d
By, Commission
Add: Commission
due but not received
1800
1200
36800
3000

Arun
Barun
6815
6815
13630
39800 39800
Balance Sheet
As on 31st December 2010
Liabilities Amount
(Rs)
Amount
(Rs)
Assets Amount
(Rs)
Amount
(Rs)
Capital Accounts
Arun
Add: Net Profit
Barun a/c
Add: Net Profit
Sundry Creditors a/c
Bills Payable a/c
Outstanding
Expenses
Wages
Salaries
60000
6815
35000
6815
1400
800
66815
41815
25000
6000
2200
Plant and Machinery
a/c
Less: Depreciation
Furniture a/c
Investments a/c
Prepaid Rent a/c
Prepaid Insurance a/c
Commission
Receivable a/c
Bills Receivable a/c
Closing Stock
Sundry Debtors a/c
Less: New Bad Debts
Cash balance a/c
40700
4070
28000
1500
36630
18000
13500
7000
500
1200
5000
31000
26500
2500
141830 141830
Notes:
i. Depreciation = 10% *Rs 40070= Rs 4070
ii. Distribution of Net Profit
Arun = Rs 13630* ½ = Rs 6815
Barun = Rs 13630* ½ = Rs 6815