Financial Accounting Assignment: Marks and Spencer Analysis

This financial accounting assignment provides a comprehensive overview of key financial accounting concepts, including the purpose of financial accounting and its role in recording and reporting business transactions. The assignment focuses on Marks and Spencer, a retail organization, and explores its internal and external stakeholders, highlighting their need for financial information. It covers double-entry recording within ledgers, including journal entries and account closures, and delves into the preparation of financial statements like the profit and loss statement and balance sheet. Furthermore, the assignment addresses the concepts of consistency and prudence, the purpose of depreciation, and differences between financial statements prepared by sole traders and limited companies. It also covers bank reconciliation statements, control accounts, and the use of suspense accounts, providing a detailed analysis of various accounting processes and their importance in financial reporting.

FINANCIAL ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
a. 1. Financial accounting and its purpose .............................................................................1
2. Name two internal stakeholders and four external stakeholders of Marks and Spencer....3
Clients 1...........................................................................................................................................4
1) Double entry recording within relevant ledger .................................................................4
2 Closing each account ..........................................................................................................7
CLIENT 2......................................................................................................................................12
a) Statement of Profit and loss .............................................................................................12
b) Balance sheet of Munteanu limited ................................................................................13
c) Explain Consistency and Prudence .................................................................................14
d) Purpose of depreciation ...................................................................................................14
E) Difference between financial statement prepared by Sole trader and Limited companies14
CLIENT 3 .....................................................................................................................................14
A) Purpose of preparing bank reconciliation statement ......................................................14
b) List and explain the areas which may cause accounting records to vary from bank records
..............................................................................................................................................15
c) The term “ Imprest” as used in Petty cash system ..........................................................15
D) Bank reconciliation account ...........................................................................................15
CLIENT 4 .....................................................................................................................................16
a) Control account ...............................................................................................................16
b) Need for preparing control account .................................................................................17
CLIENT 5 .....................................................................................................................................17
a) Explanation of Suspense account and its main features...................................................17
b) Trial balance ...................................................................................................................17
CONCLUSION .............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
Financial accounting is a system designed to keep track of company's financial
information. It consists of recording the transaction in the form of report to provide
understanding to the readers about company's position and performance. This assignment will
consider Marks and Spencer for performing the various task assigned. It is an organisation which
is performing its activities in a retail sector. Marks and Spencer deals in clothing and provide
clothing for men, women, kids etc. The revenue earned by this organisation was £10.622 billion
in the year 2017. This study will include information regarding financial accounting and Its
purpose. Also, The assignment will contain information of stakeholders of Marks and Spencer
and the requirement of financial information by them.
MAIN BODY
a. 1. Financial accounting and its purpose
Financial accounting is used for recording the day to day operations of business by using
various reports and statements. These statements and reports are prepared for identifying the
transaction which are undertaken by organization. The organization prepare reports and
statements under financial accounting by gathering data from the operations performed by
company. The financial statements are prepared by organization to provide understanding to the
users regarding the performance and profitability of firm (Barth, 2015). Organization prepares
various statement to record the transaction such as profit and loss statements, Balance sheet,
statement of equity and cash flow statements. Profit and loss statement is prepared by
Organization to determine the profits earned by performing their operations.
This statement includes the expenses and incomes for a period for identifying profits
earned by firm in that particular period. Balance sheet is prepared by organization in order to
determine liquidity position of firm by recording assets and liabilities for a particular period.
The firm by using this statement is able to get information about its position in the market.
Furthermore, Statement of equity is prepared by firm to determine the change in capital balance
over the period. Firm s by preparing this statement is able to know about the profit earned on the
capital invested. Also, A cash flow statement is prepared by organization in order to know about
cash inflow and outflow for a period (Henderson and et.al., 2015). This statement is prepared
for determining the cash balance available with organization to perform the various future
activities.
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The purpose of financial accounting is to provide better understanding to its users
regarding the financial health and profitability of organization. The main purpose of financial
accounting is to provide users to make economic decision on the basis of financial statements of
organization. Financial statements prepared by organization helps stakeholders in taking various
decisions. Also, The purpose of financial statement sis to give accurate information to its users
so that they are able to make decisions regarding investment and others which may influences
their economic decisions (Kimmel And et.al., 2016). The financial accounting ensure that the
statements are prepared in a proper ways and are made through use of simple and understandable
language so that the users can easily determine the results of those statements.
Financial accounting is useful to determine the profits and performance of firm in the
market and on the basis of which various decisions can be made regarding the future
improvement of business operations to enhance the profitability of business. Moreover, financial
accounting the process of recording business transaction in the form of statement to provide the
users with accurate and reliable information of firm's operations (Libby, 2017). Financial
accounting is based on two concepts one is accrual accounting method and other is cash
accounting method to record transactions. The financial statements provide information to
shareholders and creditors that helps to improve investment interest.
These statements are required to be maintained to measure incomes for the business.
Financial accounting assist in providing information to users to make effective decisions
regarding their investment. Financial statements helps in identifying the growth and success of
business through their performance (Warren and Jones, 2018). This records are prepared for
stakeholders of users. Financial accounting assist organization in preparing budgets for future
which will assist in identifying the future profitability of business. Moreover, Financial
accounting is useful to get better understanding of organization operation and it also helps in
reducing the expenses on the basis of past records to enhance profitability of firm.
Organization based on financial statement can make strategies for future improvement
which will assist firm in their growth and success of business. Overall business is benefited
through use of financial counting and using the statement to record the transaction understand by
organization. Financial accounting involves various stages of recording the transaction such as
recording, classifying, summarizing and interpreting the financial information (Macve, 2015).
Financial accounting involves recording the information in journal and then the ledges are
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prepared based on entries passed in journals. The next step is preparing trial balance through use
of closing balance so ledger account. Financial accounting is used for information systems for
collecting and communicating economic information about the business (Purpose of financial
statement, 2018). This information assist management in taking effective decisions for enhancing
profitability and performance of firm. Moreover, the purpose of financial accounting to keep
systematic record for the various activities performed by firm.
The organization is able to make better decisions by preparing financial statement as it is
not possible to determine profit and loss for a period without preparing records. Marks and
Spencer I for determining profitability and position of business enterprise is preparing various
financial statements such as profit and loss statement, balance sheet, statement so changes in
equity and cash flow statement to serve their various purposes (Maskell, Baggaley and Grasso,
2016). The process of financial accounting is started with recording transaction in journals and
is ended with balance sheet.
2. Name two internal stakeholders and four external stakeholders of Marks and Spencer
The stakeholders of company are the people to whom the information about the
organization activities are provided. Organization provides the financial statements to
stakeholders to give them better and reliable information regarding the activities of firm and
performance and profitability of business. These statements assist the stakeholders in making
various decisions regarding investment and other decisions (Mullinova, 2016). Stakeholders of
the company consist of internal and external. Internal stakeholders are those which are present in
the company whereas external stakeholders are those which are present outside organization.
Marks and Spencer have the following stakeholders which are divided into internal and external.
Two Internal Stakeholders of Marks and Spencer
 Management : This are the people which are responsible for managing the various
operations of organization. The managers use the financial statement to determine the
performance of organization so that decisions can be made to improve future
performance which will assist organization in enhancing their growth rate and
profitability. Management is responsible to understand the activities which are performed
by firm. Moreover, managers by using financial statement such as profit and loss, balance
sheet and cash flow statement are able to know the liquidity position and performance of
firm. This helps the management in reducing the expenses which are incurred by firm to
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get better outcomes (Schaltegger and Burritt, 2017). Marks and Spencer is providing the
management with financial information so that they are able to make effective decisions
to improve performance and profitability of firm.
 Employees : The workers required to know about the financial health of organization to
identify their future career opportunities. Organization by providing financial
information to employees is able to provide better insight to them regarding business
activities. Moreover, employees use financial information to determine their job security
and income on the basis of information present in financial statement. Marks and
Spencer is providing financial information to employees to provide them understanding
about the operations of organization.
External stakeholders of Marks and Spencer :
 Customers : Marks and Spencer is providing the financial information to the customers
so that they can give them information about various resources available with the firm.
Customers by using the financial information can make decision regarding firms ability
to provide them resources whenever demanded by them. Marks and Spencer is giving
information to its customers regarding their financial performance to retain them in
business for a longer period.
 Lenders : It consists of bank and financial institution which lend money to organization
for performing their various business operations (Users of the Financial Statements,
2018). Lenders use financial statement to get better understanding about the firm's ability
to pay its debts.
 Shareholders : Marks and Spencer provide financial information ton shareholders so that
they are able to identify their returns on investment. Moreover, they are able to get
understanding about the organization ability ton provide them higher returns.
 Government : The financial information is provided to government authorities for
various tax liabilities of firm. Income tax authority uses financial information to
determine firm's tax liability on the basis of statements prepared by them
Clients 1
1) Double entry recording within relevant ledger
Journal entries in the books of Alexandra for January are as follows
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Date particulars Debit Credit
1st jan 2019 Storage expense A/c Dr 450
To bank A/c
2nd jan 2019 Purchase A/c Dr 6080
To S. hood A/c 1450
To D main A/c 2060
To W Tone A/c 960
To R foot A/c 1610
3rd jan 2019 J Wilson A/c Dr 1200
T . Cole A/c dr 1650
F. Syme A/c Dr 2100
J . Allen A/c Dr 1020
P. white A/c Dr F. Lane A/c Dr 2520
F. lane A/c Dr 980
To sales A/c 9470
4th jan 2019 Motor Expenses A/c Dr 470
To cash A/c 470
7th jan 2019 Drawing A/c Dr 1500
To cash A/c 1500
9th jan 2019 T. cole A/c Dr 680
J. Fox A/c Dr 1310
To sales A/c 1990
11th jan 2019 Sales return A/c Dr 680
To J. wilson 270
F.syme 410
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16th jan 2019 Cash A/c Dr 7020
To P. Mullen A/c 1400
To F. Lane A/c 3100
To J. Wilson 850
To F. Shyme 1670
19th jan 2019 R. foot A/c Dr 50
To Purchase return A/c 50
22st 2019 Purchase A/c Dr 3740
To L.Mole A/C 1830
To W. Wright 1910
24th jan 2019 S. Hood A/c DR 3600
J. Brown A/c Dr 4600
R. Foot A/c Dr 1400
To Bank A/c 9600
27th jan 2019 Salary A/c Dr 4800
To bank A/c 4800
30th jan 2019 Business rates A/c Dr 1320
To bank A/c 1320
Purchase Day book
Date Details Amount
2nd jan 2019 S. Hood 1450
D. main 2060
W. Tone 960
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R. Foot 1610
22nd jan 2019 l. Mole 1830
W. Wright 1910
Total credit purchase Dr 9820
Credit each individual A/c
Sales day Book
Date Details Amount
3rd jan 2019 J. wilson 1200
T.Cole 1650
F. Syme 2100
J. Allen 1020
P. white 2520
F. Lane 980
9th jan 2019 T.cole 680
J Fox 1310
Dr each individual A/c
Cr sales A/c 11460
Purchase return Day Book
Date Details Amount
19th jan 2019 R. Foot 50
Dr each individual A/c
Cr purchase return A/c
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Sales return Day Book
Date Details Amount
11th jan 2019 J. wilson 270
F.syme 410
Dr sales return A/c 680
Cr each individual A/c
Cash Book
date receipts cash bank date payments cash bank
1st jan
2019
Balance
b/d 16600 68400
1st jan
2019 storage cost 450
16th jan
2019 P. Mullen 1400
4th jan
2019
motor
expenses 470
F. lane 3100
7th jan
2019 drawings 1500
J. wilson 850
24th jan
2019 s. hood 3600
F. syme 1670 j. Brown 4600
R. foot 1400
27th jan
2019 salaries 4800
30th jan
2019
Business
rates 1320
31st jan
2019 Balance c/d 21650 52230
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23620 68400 23620 68400
2 Closing each account
S. hood Capital A/c
date details Amount date Details Amount
24th jan
2019 cash book 3600 1st jan 2019 Balance b/d 12150
Purchase day book 1450
balance c/d 10000
13600 13600
J. Brown
date details Amount date Details Amount
24th jan
2019 cash book 4600 1st jan 2019 Balance b/d 16600
balance c/d 12000
R. foot
date details Amount date Details Amount
19th jan
2019 Purchase return book 50 2nd jan 2019 Purchase day book 1610
24th jan
2019 cash book 1400
balance c/d 160
W. Tone
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date details Amount date Details Amount
31st jan
2019 balance c/d 960 2nd jan 2019 Purchase day book 960
L. Mole
date details Amount date Details Amount
31/01/19 balance c/d 1830 22nd jan 2019 Purchase day book 1830
W. Wright
date details Amount date Details Amount
31st jan
2019 balance c/d 1910 22nd jan 2019 Purchase day book 1910
J. Wilson
date details Amount date Details Amount
1st jan 2019 sales 1200 11th jan 2019 sales return 270
16th jan 2019 cash 850
31st jan 2019 balance c/d 80
T. Cole
date details Amount date Details Amount
3rd jan 2019 sales 1650 31/01/19 balance c/d 2330
9th jan 2019 sales 680
F. syme
date details Amount date Details Amount
3rd jan 2019 sales 2100 11th jan 2019 sales return 410
16th jan 2019 cash 1670
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