Financial Accounting Principles Report - Analysis and Review

This report delves into the core principles of financial accounting, encompassing the processes, concepts, and theories essential for preparing accurate financial statements. It begins by defining the meaning and purpose of financial statements, emphasizing their crucial role in providing a clear picture of a business's financial health. The report then explores the significance of various stakeholders, both internal (owners, management) and external (creditors, customers, shareholders, government authorities), and their respective interests in financial information. It further examines key accounting concepts such as depreciation methods (straight-line and written-down value), the purpose of bank reconciliation statements, and the importance of control and suspense accounts. The report provides insights through different client examples, illustrating practical applications of these principles and their impact on business operations and decision-making.

Financial Accounting
Principles

Table of Contents
INTRODUCTION................................................................................................................................3
MAIN BODY.......................................................................................................................................3
LO 1......................................................................................................................................................3
Meaning and its purposes of financial statement-.......................................................................3
Two Internal Stakeholders-.........................................................................................................4
Four External Stakeholders-........................................................................................................4
3. Trial balance..........................................................................................................................13
Client 2...............................................................................................................................................14
b.................................................................................................................................................15
(c) Consistency and Prudency-.................................................................................................16
(d)Two methods of Depreciation are-.......................................................................................16
(e)Difference between Sole proprietorship and Limited Companies-......................................16
Client 3...............................................................................................................................................17
(a)Purpose of Bank Reconciliation Statement-.........................................................................17
(b)Some areas where differences are found between our records and bank records-...............17
(c)Meaning of term Imprest as used in petty cash book-..........................................................18
d.................................................................................................................................................18
Client 4...............................................................................................................................................19
a.................................................................................................................................................19
(b) Defining the meaning of control account............................................................................19
Client 5...............................................................................................................................................20
(a). Defining suspense account along with its key features......................................................20
b.................................................................................................................................................20
CONCLUSION..................................................................................................................................21
REFERENCES...................................................................................................................................22

INTRODUCTION
Financial accounting principles is related with the process of accounting procedures, concepts and
theories which are required to be followed at the time of preparing of financial and accounting
statements. It is very essential for every business organisation to provide accurate and correct detail
about the nature and position of the business especially financial health. The present report will
define the meaning and purpose of preparing financial statements. Also, it will discuss about
depreciation concepts along with its types. Further it will define meaning of Bank reconciliation
statements with its feature. Alt last, it will streamline about importance of control account and
suspense account for every business transaction.
MAIN BODY
LO 1
Meaning and its purposes of financial statement-
Financial Accounting means to record, summarize, analyse, report and interpret the various
financial transactions. These transactions are recorded for the preparation of financial statements.
Financial Accounting helps in the recording all the transactions related to revenues, expenses,
assets, liabilities etc. It helps in providing the information to the outsiders related to the financial
position of the company. It is helpful to internal managers to take the relevant decisions related to
the organisation for long term and short term. It can be done on the basis of two methods such as
Accrual method or cash method (Warren, and et.al., 2018). This depends on the company to
company which method they apply in their organisation.
Purposes of Financial Accounting are as follows:-
 The first and foremost function of the financial accounting is to gather all the information
and record all the financial transactions in the financial statements.
 Financial Accounting main purpose is to provide the data and information about the
financial position of the company to external and internal managers.
 The information helps in estimating the liquidity, funding and debt position of an
organisation (Kimmel, and et.al., 2016).
 Financial Accounting helps in taking decisions such as credit decisions, investment
decisions, taxation decisions etc.

Two Internal Stakeholders-
Owners of the company are one of the internal stakeholder who wants to know the financial
position of the organisation. Owners have invested their money in the company and they want to
know the returns on their investment. Owners also want to know that the investment done by them
are productively used by the company or not. Company is earnings profits or not and it is working
according to the rules or regulations.
Management is the second internal stakeholder of the company who use the financial
statements to know the financial position of the company. By using the information and data
management takes the important decisions for the organisation. Management also uses the relevant
information for achieving their personal goals through the growth of the company. They know that
if the company grows then their growth is simultaneously happens (Brunton and et.al., 2017).
Four External Stakeholders-
The first and most important stakeholder of the company is creditors. They are the ones who
are highly interested in the financial statements of the company. As they are the ones who are giving
loans to the company so they are want to know the real worth of the company. If the company is
capable of paying back their loans or not. The creditors also wants to know that the company will
be in the profitability condition even in the long time period.
Customers of the company are the stakeholders of the company. They are interested in
knowing that what are the new products or services which the company is going to launch in the
market. Many customers use the company's financial statements to know the financial position of
the company to know that what is the position of the company in the market. The customers are the
main stakeholder because company cannot survive without their customers (Korschun 2015). They
are always interested that company is coming with what new ideas and innovations.
Shareholders of the company are also the stakeholders of the company. Shareholders of the
company invest their money in the company so they are highly interested in knowing the financial
position of the company. They ware interested in knowing their returns on their investment. They
are interested that what are dividends company is going to give them every year and what will be
the earnings or profit on the capital investment of the company for the long term.
Government Authorities are the external stakeholders of the company. They are also
interested in the financial statements of the company because company pays taxes to the Govt. The
taxes are paid on the basis of profits earned by the company. Profits are taken from the financial

statements of the company. Govt. wants to know that whether the company is paying proper tax on
the profits earned by the company or not. Government are interested in financial statements of the
company because many times company gives grants to the organisation so they want to know
whether they are properly treating them in their statements or not (Korschun 2015).
CLIENT 1
1. Journal

2. Ledger