Financial Accounting Assignment: Financial Analysis and Client Cases

This financial accounting assignment provides a comprehensive overview of key concepts and practical applications. It begins with an introduction to financial accounting and its purpose, followed by an analysis of internal and external stakeholders of Marks and Spencer. The assignment then delves into various client portfolios, including journals, capital accounts, and trial balances. It includes the statement of profit and loss and statement of financial position for Munteanu Ltd. The assignment further explores accounting concepts such as consistency and prudency, the purpose of depreciation, and the differences between financial statements of sole traders and limited companies. It also covers bank reconciliation statements, areas causing deviations in bank records, the term "imprest" in petty cash statements, and updates to a cash book and bank reconciliation statement for Burcu Ltd. The assignment concludes with an examination of purchase ledger accounts and suspense accounts, and a trial balance using a control account.

Financial Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
a. 1. Financial accounting and its purpose..................................................................................1
2. Two Internal stakeholders and four External stakeholders of Marks and Spencer ................2
B) Different Clients portfolio......................................................................................................3
CLIENT 1........................................................................................................................................3
CLIENT 2........................................................................................................................................8
A). The statement of profit and loss of Munteanu Ltd. For the year ended 31st December
2018.............................................................................................................................................8
B). Statement of financial position of Munteanu Ltd, as at 31st December 2018......................8
C). Explaining the accounting concept of Consistency and Prudency........................................9
D). Describing the purpose of the depreciation with the two method of calculating
depreciation...............................................................................................................................10
E). Evaluating the difference between the financial statement of sole trader and limited
companies..................................................................................................................................11
CLIENT 3......................................................................................................................................12
A.) Purpose and reasons for preparing Bank Reconciliation Statements .................................12
B. Areas which cause deviation in bank records.......................................................................12
C. Explanation of term “ imprest” in petty cash statement.......................................................13
D). Update Burcu Ltd. Cash book for September 2018 and bank reconciliation statement as at
30 September 2018....................................................................................................................13
CLIENT 4......................................................................................................................................14
ii). Purchase Ledger accounts...................................................................................................15
CLIENT 5......................................................................................................................................15
A) Suspense account and its main features...............................................................................15
B). Trail balance using control account....................................................................................16
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Financial accounting is defined as reporting of financial information in the statements in order to
determine the profitability and position of firm for the period. In this study, Marks and Spencer
will be consider which is involved in the retail industry and its offering different products and
services. Moreover, it will provide understanding about the financial accounting and its purpose.
Furthermore, it will contain information about the internal and external stakeholders.
MAIN BODY
a. 1. Financial accounting and its purpose
Financial accounting can be defined as accounting of the financial information for
identifying the performance and profitability of business by performing various business
operations. The financial statement are prepared for recording financial information in various
statements (Macve, 2015). It consists of income statement, balance sheet and cash flow
statement. Income statement involves the incomes and expenses for a period which assist the
organisation in determining the profitability earn by the business by conducting various business
operations. The purpose of financial accounting is to provide accurate and reliable information
about the business activity in order to make effective business decision for improving
performance of firm. The information is used by the stakeholders for various purposes.
With the help of financial accounting organisation in able to provide better understanding
to the stakeholders about the financial performance of company. Financial accounting helps
business in improving their future profitability and performance through statements prepared by
the firm that reflect the profits earned during the period. The purpose of financial accounting is
to prepare financial reports that provide information about firm's various operations to the
investors and other stakeholders to make business decision. Cash flow statement include the
information about the cash inflow and outflow for the period to identify the cash requirement of
business. Balance sheet prepared by firm assist in identifying the financial position through use
of assets and liabilities. Financial accounting helps firm in better understanding about their
operation and reducing their expenses through use of income statement to increase their
profitability.
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2. Two Internal stakeholders and four External stakeholders of Marks and Spencer
The internal stakeholder of the company are those which are present in the business
environment of organisation and use the financial statements for making the various business
decisions. The internal stakeholder of Marks and Spencer consist of following :
Management: The management is the internal; stakeholder of firm as it uses the
financial information in order to manage the resource inn the most efficient way to increase the
future profitability of business (Henderson anmd et.al., 2015). With the help of financial
information management is able to understand the factors which are affecting profitability of
business and can make effective decision for improving future performance.
Employees: The employee of Marks and Spencer are considered as internal stakeholders
as they use the financial information for identifying the growth of company in order to
identifying their due career opportunities for improving the job satisfaction. Marks and Spencer
provide the financial information to the employees in order to provide them understanding about
the various operations performed by firm.
The external stakeholder of the company can be termed as the individuals, group or
companies who are not a part of an organisation, but can be affected or can affect the business
decisions and performance of the company. The external stakeholder do not have any financial
stake from the company but do concern with the performance of the company and its success.
They are critical for the overall success of the company. There are many extyernal; external
stakeholder of a company, some of them are:
Customers: they are most important part of the company as they consumers the goods
and services of the company (Edwards, 2013). They are the one who generate revenue for the
business. They are concerns in order to determine the profitability and ability of the company in
order to survive for a longer time in market. Financial information will be beneficial for those
customers who are dependent on the company's product and services.
Shareholders and investors: They are considered as the main source of funds for the
company. Shareholders or investors purchases the shares of the company in order to invest their
money in the company. It can be said that, financial information will assist in knowing the
financial performance of the company, the profitability of the company and security of their
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investment. These financial information is beneficial assist them in knowing their potential
return from their investment in company.
Competitors: They are rivals of the business who will be keen to know the financial
performance and capabilities of the companies and their financial performance. These financial
statements will assist the competitors to set as the benchmark in order to make appropriate
competitive strategics.
Government: they are the authority of the states or local where the company is
operating. The financial information and statement will assist in ensuring the government that the
business is disclosing their accurate financial information in according to the regulation (Weil,
Schipper and Francis, 2013). The government will also keen to know the financial performance
and profitability which assist them in tax purposes as well.
B) Different Clients portfolio.
CLIENT 1
Journals and capital account as per January 1st 2019
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4

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Trail balance:
Trial balance for the month ended January
Particular Debit Credit
S. Hood 10000
J. Brown 12000
R. foot 160
W. Tone 960
L. Mole 1830
W. Wright 1910
J whilson 80
F. syme 20
T.cole 2330
J. Allen 1020
P white 2520
F.lane 2020
J.fox 1310
P.mullen 3000
Sales 11460
Purchase 9820
purchase return 50
sales return 680
storage cost 450
Motor expense 470
salary 4800
drawings 1500
business rates 1320
capital 382900
premise 240000
van 51250
Fixtures 8100
inventory 23900
Cash in hand 21650
Cash at bank 52230
suspense account 7200
428470 428470
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CLIENT 2
A). The statement of profit and loss of Munteanu Ltd. For the year ended 31st December 2018.
Statement of profit and Loss as per the year ended 31st December 2018
Particulars £ £
Sales 138000
Less : COS
Opening Stock 15000
Add: Purchases 61000
Less: Closing Inventory 20000
depreciation treated as cost of sales 800 56800
GP 81200
Less : expenses
Wages and salaries 2000 2000
operation cost 30000
Add : 50% depreciation on plant 4000 34000
Distribution expenses 35000
Add: 50% depreciation on plant 4000
Less: Rent prepaid 3000 36000
Corporation tax 2000 2000
depreciation on building /Cost of sales 800
74000
Net profit 7200
B). Statement of financial position of Munteanu Ltd, as at 31st December 2018.
Particular £ £
Current assets
Stock 20000
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Prepaid rent 3000
Receivables 26000
Sales return 3000
Total current assets 52000
Non – current assets
Land & building 60000
Less : accumulated depreciation 10000
- Depreciation on building 800
49200
Plant and machinery 60000
Less : 20000
Less : 8000 32000
Total fixed assets 81200
Total assets 133200
Liabilities
Current liabilities
Payables 22000
accrued salary 2000
Bank overdraft 18000
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