Financial Accounting Assignment - Bain & Company Analysis and Rules

This financial accounting assignment delves into the core concepts and practical applications of financial accounting. The assignment begins with an introduction to financial accounting, emphasizing its role in recording, summarizing, and reporting financial transactions for business entities like Bain & Company. It covers key topics such as financial statements (balance sheet, income statement, cash flow), accounting standards, and regulatory bodies. The assignment explores the rules of accounting, including personal, real, and nominal accounts, and also the fundamental accounting principles like economic entity, monetary unit, time period, cost, full disclosure, and going concern assumptions. Furthermore, it discusses various accounting conventions and concepts, such as conservatism, full disclosure, consistency, materiality, and the matching concept. The assignment includes detailed journal entries, ledger accounts, and trial balance, providing a comprehensive understanding of the accounting process.

Financial Accounting

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
A......................................................................................................................................................3
1...................................................................................................................................................3
2...................................................................................................................................................4
3...................................................................................................................................................4
4...................................................................................................................................................5
B.......................................................................................................................................................6
1...................................................................................................................................................6
2.................................................................................................................................................11
3.................................................................................................................................................12
4.................................................................................................................................................13
5.................................................................................................................................................14
6.................................................................................................................................................15
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INTRODUCTION
Financial accounting is a part of accounting which assist the company in moving on track
and do the financial transactions in the favour of the business entity. The employees of the firm
who are using the financial accounting they have to adopt the standardized guidelines and in this
transactions are to be recorded, summarized as well as presented in report which is based on the
finance along with the financial allegation which includes the income proclamation as well as
balance sheet (Reports, Financial and Statutory Statements, 2017). The present report is based on
Bain and company which is an American global management consulting firm. In the assignment,
concept of financial accounting has to be discussed.
TASK
A
1.
Financial accounting refers to the process of recording, summarizing along with the
reporting which assist in doing the proper and appropriate financial transactions which helps in
providing the best results based on the business operations or the activities in a specific or a
given period. There are different financial statements which includes balance sheet, income
statement along with the statements which denotes the cash flow of the firm which assist in
identifying and managing the performance of the business entity in the market (Cash versus
accrual accounting, 2017). Companies use financial statement on a routine basis and these are to
be considered as external statements as it helps the stakeholders in making the judgements that
they have to do investments or not. The main purpose of the accounts of finance does not provide
the report according to the value of the business entity but it helps in providing the enough
information or data which will helps in assessing or analysing the value of Bain and company.
As external statements which are taken in use by the distinctive people by the distinctive ways
and according to that they can make the correct decision. Financial accounting has a common
rules which includes accounting standard and they are known as generally accepted accounting
rules (GAAP). It helps the business entity in developing the accounting standards as well as
principles which they are following (Henderson and et. al., 2015). The corporations who are
trading their stock or shares publicly then they must comply with requirements of reports on the

basis of commission which is related to security and exchange as it is a agency of US
government.
2.
There are two type of regulations which are related to financial accounting which can be
used by Bain and Company:
Accounting standards Board: This board is autonomous and the main role of this board is
to issue the standards. Accounting standards are the authoritative statements which help in doing
the particular type of transactions and it should be reported in a financial statements as well as
they are compliance with different accounting standards as it is necessary to make the
appropriate and correct financial statements which helps in providing the image of the firm in
front of the investors. The main purpose of the business entity have to create the proper and
appropriate standards so that they can define the distinctive practices by using the legal policies
(Renz, 2016).
Statement of principles: It is a conception which is based on the recommendations as well
as suggestions of a financial report. It helps in doing the activities which should be supported on
financial statements. Along with the facet of those activities which are highlighted. Moreover,
the information or data should be presented in the financial statements in a proper manner. The
main purpose of principle statement is to provide a framework according to the theory which is
consistent and they are having the logical formulation with the different standards of accounts.
3.
There are three rules of accounting which are:
Personal account: The rule for this is Debit the Receiver, Credit the Giver.
Real account: Rule is Debit What Comes In, Credit What Goes Out.
Nominal account: Rule is Debit all expenses and losses, Credit all incomes and gains.
There are some basic principles which are included in the accounting principles and they
are:
Economic entity assumption: It helps the owners of sole proprietorship in the recording
the business transactions from the business owners personal transactions.
Monetary Unit assumption: The employees of the business entity have to record the
whole data of transactions. They have to make the payments in a specified time (Macve, 2015).

Time period Assumption: This principle assumes the data which is possible to them in
recording the data in the report in a complex nature and also to be in the ongoing activities of a
business in a short time.
Cost principle: In this principle, the tern cost refers to the amount which is to be spent
when it was originally obtained. But in the financial statements the value which is to be recorded
as a historical cost amounts.
Full Disclosure principle: If any information or data which are using in the financial
statements then the information or data disclosed in front of the investors within the statement. It
is the basis and necessary accounting principle which includes the different pages are shown in
the “footnotes” and they are related with the financial statements (Beaumont, 2015).
Going Concern Principle: This principle helps the business entity in continuing their
business to exist for a long term so that they can carry out its objectives as well as commitments.
Along with this it will not liquidate in the foreseeable future.
4.
Different conventions and concepts of accounting includes:
Conservatism: This convention includes the accounts which needs to be follow by using
the different rules which helps in generating profit but along with this they have to provide the
losses as well as which assist in recording or analysing the different business transactions. This
concept affects the principally the category of the current assets. This principle provides the
encouragement the accountant to create the secret reserves along with the financial statements
which does not show the image as well as fair view of affairs of the company.
Full disclosure: According to this convention, the person who are using the company's
financial statements are informed and they have to use the different facts which are essential for
the investors to do interpretation of statements. It helps in handling the information of events in
the accounting records, comparison of its financial statements for one period with another one
and that is difficult (Trucco, 2015).
Consistency: This convention defines the entity which has decided on one method and by
using the different tools and techniques of the events with the same character. This convention
does not provide the proper and appropriate treatment of different categories of the transactions
must be consistent with one another.

Materiality: It helps in providing the importance for an event along with the event. The
material convention helps in providing the proper knowledge of the item. Along with this it assist
in affecting the decisions of the different users which are based on the different financial
statements. The matching concept helps in identifying the values for depreciating the plant assets
value over their useful life as it denotes the low cost items which are to be immediate in a
appropriate manner to the expense account so that they can reap the best results with the
distortion in the financial statement as it is small in nature (Trucco, 2015).
B.
1.
Journal entries:
Particulars Debit Credit
Storage Expenses A/c Dr.
To Bank A/c
400
400
Purchase A/c Dr.
To S. Hood
To D. Mane
To W. Tone
To R. Foot
6080
1450
2060
960
1610
J. Wilson A/c Dr.
T. Cole A/c Dr.
F. Syme A/c Dr.
J. Allen A/c Dr.
P. White A/c Dr.
F. Lane A/c Dr.
To Sales A/c
1120
1640
2080
910
2420
770
8940
Motor Expenses A/c Dr.
To Cash A/c
470
470
Drawings A/c Dr.
To Cash A/c
1500
1500
T. Cole A/c Dr. 680

J. Fox A/c Dr.
To Sales A/c
1310
1990
Sales Return A/c Dr.
To J. Wilson A/c
To F. Syme A/c
680
270
410
Van A/c Dr.
To Able Motor Ltd. A/c
28500
28500
Bank A/c Dr.
Discount allowed A/c Dr.
To P. Mullan A/c
To F. Lane A/c
To J. Wilson A/c
To F. Syme A/c
6670
350
1400
3100
850
1670
R. Foot A/c Dr.
To purchase A/c
50
50
Purchase A/c Dr.
To L. Mole A/c
To W. Wright A/c
3740
1830
1910
S. Hood A/c Dr.
J. Brown A/c Dr.
R. Foot A/c Dr.
To Bank A/c
To Discount Received A/c
3600
4600
1400
8640
960
Salary A/c Dr.
To Bank A/c
4800
4800
Business rates A/c Dr.
To Bank A/c
1320
1320
Able Motors Ltd. A/c Dr.
To Bank A/c
20500
20500
Ledger Account:
Cash A/c

Particulars Amount Particulars Amount
To balance B/d 5600 By motor exp.
By drawings
By Balance C/d
470
1500
3630
5600 5600
Bank A/c
Particulars Amount Particulars Amount
To balance B/d
To debtors
62400
6670
By storage expense
By salary
By Business rates
By able motors
By Creditors
By Balance C/d
400
4800
1320
20500
8640
33410
69070 69070
Sales A/c
Particulars Amount Particulars Amount
To receivables
To Balance C/d
680
10250
By receivables
By receivables
8940
1990
10930 10930
Purchase A/c
Particulars Amount Particulars Amount
To Payables
To payables
6080
3740
By payables
By Balance C/d
50
9770
9820 9820
Storage Expense A/c
Particulars Amount Particulars Amount
To bank 400 By Balance C/d 400
400 400
Creditors A/c
Particulars Amount Particulars Amount
To purchase 50 By Balance B/d 6750

To Dis. Received
To bank
To Balance C/d
960
8640
6920
By purchase
By purchase 6080
3740
16570 16570
Debtors A/c
Particulars Amount Particulars Amount
To Bal B/d
To sales
To Sales
4500
8940
1990
By Sales
By dis. allowed
By bank
By Balance C/d
680
350
6670
7730
15430 15430
Motor Exp. A/c
Particulars Amount Particulars Amount
To cash 470 By Balance C/d 470
470 470
Drawings A/c
Particulars Amount Particulars Amount
To cash 1500 By Balance C/d 1500
1500 1500
Van A/c
Particulars Amount Particulars Amount
To Balance B/d
To Able
51250
28500
By Balance C/d 71750
71750 71750
Able Motor Ltd. A/c
Particulars Amount Particulars Amount
To Bank
To Balance C/d
20500
8000
By Van 28500
28500 28500
Discount Allowed A/c

Particulars Amount Particulars Amount
To Debtors 350 By Balance C/d 350
350 350
Discount Received A/c
Particulars Amount Particulars Amount
To Balance C/d 960 By Payables 960
960 960
Salary A/c
Particulars Amount Particulars Amount
TO Bank 4800 By Balance C/d 4800
4800 4800
Business Rates A/c
Particulars Amount Particulars Amount
To Bank 1320 By Balance C/d 1320
1320 1320
Trial Balance:
Particulars Debit Credit
Business rates 1320
Salary 4800
Discount allowed 350
Van 79750
Drawings 1500
Motors Expenses 470
Debtors 7730
Storage expenses 400
Purchase 9770
Cash 3630

Bank 33410
Inventory 63900
Premises 340000
Fixtures 8100
Discount receives 960
Able motors 8000
Creditors 6920
Sales 10250
Capital 529000
555130 555130
2.
Profit and loss account:
Particulars Amount
Sales
Other incomes
Total income (A)
Change in stock
Purchases
Advertisement Expenses
Motor expense
Wages and salary
Dep. On premise
Dep. On equipment
Dep. On motor
Administration expenses
Heat and lighting
Total Expenses (B)
1215000
0
1215000
19440
778800
4810
87400
178720
5400
17250
2800
17650
4950
1117220

Net profit (A-B) 97780
Balance sheet:
Particulars Amount Particulars Amount
Capital 332120
(-) Drawings 42640
Net Profit
Payables
O/s salary
Bank Overdraft
289480
136660
76910
1220
11290
Freehold premises
Equipments
Motor
Average receivables
Stock
Prepaid expenses
Cash
227100
57750
11200
106960
101640
8470
2440
515560 515560
3.
a.
Profit and loss account:
Particulars Amount Particulars Amount
Opening stock
Purchases
17000
32000
Sales
Closing stock
105000
18000
Gross Profit 74000
Depreciation on building
Depreciation on plant &
Machinery
Administration cost
Distribution cost
Corporation tax
Net profit
10000
10000
30000
19000
4000
10000
Gross Profit 74000
74000 74000
b.
Balance sheet:
Particulars Amount Particulars Amount
Share capital 50000 Land & Buildings 52000