Financial Accounting Principles: Client Accounting Analysis Report

This document provides a comprehensive solution to a Financial Accounting Principles assignment. It begins with an introduction to financial accounting, defining its meaning, regulations, and the importance of financial reporting. The assignment covers key accounting rules and principles, including GAAP, consistency, and material disclosure. The solution includes detailed journal entries, ledger postings, and trial balances for two clients, along with profit and loss statements and financial position statements. The report demonstrates the application of accounting principles in practical scenarios, offering a valuable resource for students studying financial accounting. The document provides a detailed analysis of financial transactions, accounting standards, and the preparation of financial statements. The report concludes with a discussion of the key principles and their application in the context of the provided client data.

Financial Accounting
Principles

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1. MEANING OF FINANCIAL ACCOUNTING...........................................................................1
2. REGULATIONS RELATED TO FINANCIAL ACCOUNTING..............................................1
3. ACCOUNTING RULES AND PRINCIPLES............................................................................2
4. CONVENTIONS AND CONCEPTS RELATED TO CONSISTENCY AND MATERIAL
DISCLOSURE.................................................................................................................................3
CLIENT 1........................................................................................................................................4
(a) Books of prime entries......................................................................................................4
(b) Ledger posting..................................................................................................................7
Trial balance.........................................................................................................................15
CLIENT 2......................................................................................................................................16
(a) Profit and loss statement for Peter piper.........................................................................16
(b) Financial Position Statements.........................................................................................17
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INTRODUCTION
Financial accounting is a section in which all the financial and monetary records of an
organisation are kept in a systematic manner. It is used in financial reporting and important as
manager's perspective (Collier, 2015). This report defines the dynamics of accounting principles,
financial and accounting standards. It also explains the legislations and regulations regarding
financial accounting. Meaning of consistency and material and disclosure are also defined in this
context.
1. MEANING OF FINANCIAL ACCOUNTING
To operate the functions and operations of business large number of cash and financial
resources are used. Various type of cash, non-cash transaction happened in normal business
operations. Financial accounting is a system which help to retain financial and monetary
transactions properly (Kim and Zhang, 2016). Scope of finance and accounting has become vital
and essential subject to financial growth of organisation. Financial reporting and accounting
methods are used by managers to achieve competence in management and operations.
Financial and accounting reporting helps financiers, investors, stakeholders and owners.
There are certain rules and principles followed while preparing accounting and financial
statements. These rules are known as accounting standards and Generally Accepted Accounting
Principles (GAAP). Cost principles, matching principles, disclosure of accounting policies, going
concern, economy entity, reliability and relevance assumptions are considered in GAAP. These
rules and regulations are given by Financial Accounting Standards Board (FASB, Pronounced
“Fas-bee”). It is a non-government authority which provides standards to business organisation
to record the information and reporting structure (Awrey, 2012.). There are various type of
financial statements are made as per the principles and rules like income statement, financial
position statement, profit and loss statement, balance sheet, statement of stockholder's equity and
financial reporting.
1

2. REGULATIONS RELATED TO FINANCIAL ACCOUNTING
(Source: Generally Accepted Accounting Principles (GAAP), 2017)
Financial reporting council (FRC) is made which work as an independent authority for
corporate reporting and governance. The chairman of this authority is elected by trade and
industry and the bank of England. Accounting Standard Boards (ASB) are made from the
Accounting Standards Committee (ASC) in 1990. Guidelines are followed since the companies
act (1985) was made. ASC has the authority to set its own standards and principles in respect of
accounting and financial reporting (Ramanna and Watts, 2012). Chairman and technical directors
remain the part of Accounting Standards board is one of the main authority which provides rules
and standards regarding.
3. ACCOUNTING RULES AND PRINCIPLES
Accounting rules and regulations which are given by the Financial Reporting Standards
are followed by the organisation (Elzahar and Hussainey, 2012). These accounting standards are
applied on financial institutions and the organisation which deals in investment banking.
2

Accounting system is made of various principle and assumptions as economic entity
assumptions, monetary unit assumptions, time period assumptions, cost principles, full disclosure
principle, going concern accounting and principles, matching principles, revenue recognition
principles, conservatism, materiality, relible, verifiable and objectives principles.
4. CONVENTIONS AND CONCEPTS RELATED TO CONSISTENCY AND
MATERIAL DISCLOSURE
Consistency – this is one of the assumption which signify towards following same
accounting principles and rule. There should not be any kind of variations and change found in
general accounting principles and assumptions (Manetti, 2011). It is considered as example that
if a company is following the straight line method for charging the depreciation on assets, then it
should not be change for subsequent years.
Material Disclosure - Materiality indicates towards the factors and figures which must
be cleared while making accounts and financial statements. There must be proper records and
information to be maintained as per legal guidelines and rules (He, Wong and Young, 2012). For
example there must be a complete reports and information to be retained in recorded regarding
purchase of machinery and installations of plants.
3

CLIENT 1
(a) Books of prime entries
Journal entries (Figures in £)
Date Particular L/F Debit Credit
01/05/16
2/05/2016
3/05/2016
4/05/2017
7/05/2016
Storage a/c
To Bank a/c
(Being storage paid)
Purchase a/c
To S. Hood
To D. Main
To W. Tone
To R. Foot
(Being purchase made)
J. Wilson a/c
T. Cole a/c
F. Syme a/c
J. Allen a/c
P. White a/c
F. Lane a/c
To Sales a/c
(Being sales made)
Motor a/c
To Cash a/c
(Being motor purchased)
Drawing a/c
To Cash a/c
400
6080
1120
1640
2080
910
2420
770
470
1500
400
1450
2060
960
1610
8940
470
4

9/05/2016
11/05/2016
14/05/2016
16/05/2016
19/05/2016
(Cash withdrawal for personal use)
T. Cole a/c
J. Fox a/c
To Sales a/c
(being sales made)
Sales return a/c
To J. Wilson a/c
To F. Syme a/c
(Being Goods returned)
Van a/c
To Abel Motors Ltd
(Being Van purchased )
Bank a/c
To P. Mullen
To F. Lane
To J. Wilson
To F. Syme
(being payment maid)
Discount allowed a/c
To P. Mullen
To F. Lane
To J. Wilson
To F. Syme
(Being Discount Allowed)
R. Foot account a/c
680
1310
680
28500
6669
351
50
1500
1990
270
410
28500
1330
2945
807.5
1586.5
70
155
42.5
83.5
5

22/05/2016
24/05/2016
27/05/2016
30/05/2016
31/05/2016
To Purchase return a/c
(Being Purchase return)
Purchase a/c
To L. Mole
To W. Wright
(Purchase made)
S. Hood a/c
J. Brown a/c
R. Foot a/c
To Bank a/c
S. Hood a/c
J. Brown a/c
R. Foot a/c
To Discount received
(360+460+140)
(Payment made and discount received)
Salaries a/c
To Bank a/c
(Being salaries paid)
Business rates a/c
To Bank
(Being rates paid)
Abel Motors Ltd a/c
To Bank a/c
To Cash a/c
(Being payment made to Abel motors)
3740
3240
4140
1260
360
460
140
4800
1320
28500
50
1830
1910
8640
960
4800
1320
20500
8500
6

Working note
1. Payment Received from
P. Mullen {1400- (1400*5%)} = 1330
F. Lane {3100- (3100*5%)} = 2945
Net goods sold and payment received from
J. Wilson (1120-270) = (850-850*5%) = 808
F. Syme (2080-410) = (1670-(1670*5%)) = 1587
1. Discount Received from
S. Hood (3600*10%) = 360
J. Brown (4600*10%) = 460
R. Foot (1400*10%) = 140
(b) Ledger posting
Bank
account
Date Particulars Amount Date Particular Amount
01/05/16 To balance B/d 91392 01/05/16
By Storage
expensed 400
16/05/16 To P. Mullen 1330 24/05/16 By S. Hood 3240
To F. Lane 2945 By J. Brown 4140
To J. Wilson 807 By R. Foot 1260
To F. Syme 1586 27/05/16 By Salary a/c 4800
30/05/16 By Business rates 1320
31/05/16 By Able motors 20500
01/05/17 By balance c/d 62400
98060 98060
Premises a/c
Date Particulars Amount Date Particular Amount
7

01/05/16 To balance B/d 340000
01/05/17 by balance 340000
Total 340000 340000
Van
account a/c
Date Particulars Amount Date Particular Amount
01/05/16
To opening
balance 22750
14/05/16 To abel Motors 28500
01/05/17 by balance 51250
51250 51250
P. Mullen a/c
Date Particulars Amount Date Particular Amount
01/05/16 balance B/d 2800 16/05/16 By bank 1330
By Discount
allowed 70
01/05/17 by balance 1400
2800 2800
S. Hood
Date Particulars Amount Date Particular Amount
01/05/16 By balance b/d 1600
01/05/17 To Balance C/d 2150 02/05/16 By purchase 1450
2150 2150
S. Hood
Date Particulars Amount Date Particular Amount
8

01/05/16 By balance b/d 1600
01/05/17 To Balance C/d 2150 02/05/16 By purchase 1450
2150 2150
Storage
cost
Date Particulars Amount Date Particular Amount
01/05/16 To bank 400 01/05/17 By balance c/d 400
400 400
Sales a/c
Date Particulars Amount Date Particular Amount
03/05/16 By J. wilson 1120
By T. Cole 1640
By F. Syme 2080
By J. Allen 910
By P. White 2420
By F. Lane 770
09/05/16 By T. Cole 680
By J. Fox 1310
22/05/16 By L. mole 1830
01/05/17 To Balance C/d 14670 by W. Wright 1910
14670 14670
Purchase a/c
Date Particulars Amount Date Particular Amount
02/05/16 To S. hood 1450
To D. main 2060
To W. Tone 960
To R. Foot 1610
22/05/16 To L. Mole 1830
9

W. Wright 1910 01/05/17 By balance c/d 9820
9820 9820
Fixtures a/c
Date Particulars Amount Date Particular Amount
01/05/16 To balance b/d 8100
01/05/17 By balance 8100
8100 8100
Inventory a/c
Date Particulars Amount Date Particular Amount
01/05/16 To balance b/d 63900
01/05/17 By balance 63900
63900 63900
F. Lane a/c
Date Particulars Amount Date Particular Amount
01/05/16 To balance c/d 5430 16/05/16 By bank 2945
by Discount
Allowed 155
03/05/16 To sales 770
01/05/17 By balance 3100
6200 6200
J. Brown
Date Particulars Amount Date Particular Amount
01/05/16
by balance
B/d 4600
10