Financial Accounting Principles Report: Client Analysis and Report

This comprehensive report on financial accounting principles begins with an introduction to financial accounting, defining its role and outlining relevant regulations and accounting rules. It delves into key concepts like consistency and material disclosure, followed by an analysis of practical applications through various client scenarios. The report covers topics such as double-entry bookkeeping, profit and loss statements, financial position statements, bank reconciliation, control accounts, and suspense accounts. It explores the importance of financial statements and the role of accounting in maintaining financial ethicalness and consistency. The report also examines the rules and regulations set by IASB, and accounting principles like matching, historical cost, and revenue recognition. The report concludes with a discussion of consistency and material disclosure. This report is a detailed guide to understanding the core principles and practical applications of financial accounting.

FINANCIAL ACCOUNTING
PRINCIPLES

Table of Contents
INTRODUCTION...........................................................................................................................1
BUSINESS REORT........................................................................................................................1
1. Defining financial accounting.................................................................................................1
2. Regulations related to financial accounting............................................................................2
3. Accounting rules and principles..............................................................................................4
4. The conventions and concepts relating to consistency and material disclosure.....................5
CLIENT 1........................................................................................................................................6
CLIENT 2........................................................................................................................................9
a) Profit and loss statement ........................................................................................................9
b) Financial position statement.................................................................................................10
CLIENT 3......................................................................................................................................11
a) Profit and loss of Raintree Ltd..............................................................................................11
b) Financial position statement of Raintree Ltd........................................................................11
c) Accounting concepts.............................................................................................................12
d) Purpose of depreciation in formulating accounting statements............................................12
CLIENT 4......................................................................................................................................13
a) Bank reconciliation Statement..............................................................................................13
b) cash book..............................................................................................................................14
CLIENT 5......................................................................................................................................15
a) Sales ledger control account and purchase ledger control account.......................................15
b) Importance of control account..............................................................................................15
CLIENT 6......................................................................................................................................16
a) Suspense account and main features.....................................................................................16
b) Trial balance (£)....................................................................................................................16
(c) Reconcile suspense account.................................................................................................16
d) Difference between clearing accounts and suspense accounts.............................................16
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Accounting and management are the key requirement of business and organisations.
There are type of strategies and plans are made in terms of maintaining financial ethicalness and
consistency. Accounting principles and concepts frame the structure of keeping records and
details in organised manner. Financial accounting rules, legislations and standards assist
managers and accountants to operate the business and functions according to rules and
legislations (Edwards, 2013).
There is a business report prepared which defines the meaning of financial accounting,
regulations related to financial accounting. There are rules and principles defined subject to
maintain financial ethicalness and discipline are defined in this context. Conventions and
consistency which remain related to consistency and material disclosure are also defined in this
context. Practical evaluation done subject to book-keeping system, trial balance, accounting
rules, retaining of transactions and information in books of accounts elaborated in this context.
Analysis of financial information by using various data are reconciled and operated in financial
accounting.
BUSINESS REORT
1. Defining financial accounting
Financial accounting
Financial management and accounting is one of the important branch of management
accounting which assist managers and accountants to keep financial records and information in
systematic manner. There are guidelines, legislations and rules made subject to financial
accounting. These rules are followed by organisations to present financial reports and publish
relevant information for stockholders, shareholders and owners of organisation. Mainly financial
accounting is used to maintain the financial records and information in effective manner and
present these reports to managers and stakeholders of organisation. These statements are mainly
associated with external and internal environment of business (Hatfield, 2014).
Financial accounting is also considered as a language of organisation which
communicates the organisational aim and objectives in financial terms and provides an
information related to economic and financial information for outside parties as shareholders and
creditors. Financial accountants and chartered are hired by the business to maintain and analyse
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the essential aspect in terms of business and operations. There are type of financial statements
are prepared by organisations which present the information related to financial performance and
analyse the financial health of business.
Cash flow statement: this is the statement which present the information related to
consumption of cash during the year. This statement mainly contains the information of
utilization of cash in in various activities such as cash flow from operating activities, cash flow
from investing activities and cash flow from financing activities. Overall cash inflows and
outflows information are presented in this statements. With the help of this statements managers
and accountants be able to make strategies and plans for arrangement of cash (Songini, Gnan and
Malmi, 2013).
Income and expenditure statement: this is the statement which defines the profitability
of organisation. This statement covers all the revenue expenditure and income to evaluate the
profit and loss for the year. All the expenses are recorded in the debit side of statement and all
the income and revenues are recorded in credit side. Excess over expenditure is considered as a
profit and excess over income indicates loss. Evaluation of income statement helps mangers and
accountants to make profit strategies and plans.
Financial position statement: this statement mainly associated with identifying the total
assets and liabilities of organisation. This statement present the clear picture of financial position
of organisation to stakeholders, investors, financiers and directors. Current assets, fixed assets,
current liabilities, share capital (Equity and preference), non current and current liabilities are the
elements which are considered in this statement. To generate financial help and funds, there are
strategies and plans are prepared by mangers of association.
Change in equity statement: this statement mainly associated with analysing the
variations in equity and share capital of organisation. There is a statement prepared which
contains equity share capital, shares issued during the year, sum of reserves and surplus,
securities premiums and profit. With the help of this statement managers be able to identify the
difference and variations done during the year subject to equity (Zeff, van der Wel and
Camfferman, 2016).
2. Regulations related to financial accounting
Rules, regulation and legislations helps to maintain and control the accounting records in
more effective and efficient manner. To get accurate information and results managers and
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accountants adopt financial rules and legislations. By adhering financial rules and regulations
organisation be able to maintain its financial information and details in systematic way. Financial
accounting is a process which starts form gathering information, collecting financial data and
keeping the records for making financial plans and strategies. It is very important for the
business to present the financial information accurately and as per the legal structure.
IASB (International Accounting Standards Board)
IASB was formed in April 2001 which is one of the independent accounting standard
board produces rules and regulations related to financial accounting. There is a committee
operates the IASB and keep align with making financial plans and strategies for better
management and operations. There are two main bodies as the trustees and the IASB works upon
financial accounting standards. Financial reporting standards and Standard Advisory council
works together to produce financial rules and regulations.
FRS
Financial Reporting standards and the quality management are the essential aspect in
terms of making the financial rules and regulations for better evaluation and management of
finance department. FRS 1 mainly associated with handling cash flows, operating activities,
taxation treatment, return on investments and producing finance, acquisition and disposals,
equity dividends and management are considered in this context (Aletkin, 2014).
FRS 3 provides rules and regulations related to present the financial performance in terms
of profit and loss of organisation. Financial performance of organisation is evaluated on the basis
of following components under FRS 3;
 Outcomes of regular operations containing acquisition
 Outcomes subject to discontinued operations
 Revenues and losses on the sale or termination of an operation, costs of a fundamental
reorganisation or reconstructing, profitability and losses on the disposal of non current
assets
 Records of extraordinary items and transactions.
There are also some financial reporting standards made which are adopted by organisations
which are as follows
FRS 10 which is related to treatment of goodwill and intangible assets.
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FRS 15 this is the principle which provides rule related to tangible fixed assets with exception of
investment properties. SSAP 19 also followed under this standard as accounting for investment
properties. Main objective of FRS is to define the tangible fixed assets which are counted at
consistent basis (Ennew, Waite and Waite, 2013).
FRS 18 standard defines the policies and standards subject to disclosure of accounting policies.
Main objective of this standard is to assure managers and accountants for material information in
more effective and efficient manner. This FRS is also interrelated with SSAP 2 which is related
to 'disclosure of accounting policies' which are published under accounting periods. This
contains following essential elements such as relevance, reliability, comparability,
understandability.
3. Accounting rules and principles
Rules of accounting
Credit what goes out and debit what comes in: The given guideline applies on the
genuine records of the organization which its arrangements with. These are the advantages of the
organization and in this way they have a charge adjust in the books of record. The genuine
records of organization incorporates records, for example, plant and gear, Building, Land and so
forth (Boone, Linthicum and Poe, 2013).
Debit all expenses and losses, credit all the revenues and gains: This manage of
bookkeeping applies on all the ostensible records that the organization manages. The capital that
the organization have is an obligation for it and in this manner it has credit adjust.
Credit the giver and debit the receiver: The individual records of organization are the
genuine individuals who manages the business and these records can likewise additionally be
legitimate body. According to this control of bookkeeping, it applies on all the individual records
that are managing the business either immediate or in a roundabout way (Colasse and Durand,
2014).
Accounting principles:
Matching principle: This rule suggests that the incomes that are happened in a money
related year ought to be coordinated with the cost that is caused in delivering that income.
Historical Cost principle: According to this rule of bookkeeping, It is required by the
bookkeepers that they record the advantage bought by the organization at the value which is paid
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by the organization to obtain the benefit and this cost is considered as the premise of
bookkeeping at the season of the buy and furthermore in the resulting Financial years.
Revenue recognition Principle: The standard of income acknowledgement is principally
worried about chronicle the incomes of business in the salary articulation of the company (Di
Pietr, AyArt and Ronen, 2014).
4. The conventions and concepts relating to consistency and material disclosure
Material Disclosure: This progression is taken by the bookkeepers so money related
proclamations of the organization are not loaded with consistently subtle elements and exchanges
that are not critical to be recorded. According to this tradition of bookkeeping , it infers that the
bookkeepers of organization need to record and mull over just those exchanges which are
applicable and have noteworthy direction and all the unimportant things must be overlooked. It
ought to likewise be noticed that a thing which is material for one concern can be Irrelevant or
insignificant for another worry. Yet at the same time this procedure is entangled on the grounds
that their no such particular recipe with respect to which exchanges are applicable and which are
not, this is simply an issue of decisions that will be taken by the bookkeeper who is setting up the
records. And furthermore, a thing material in one monetary year may get superfluous in next
bookkeeping year.
Consistency convention: According to this tradition of bookkeeping, it suggests that
bookkeeping hones which are relevant or embraced in current year ought to be appropriate in the
organization for the specific time frames and ought not be changed for specific periods. This
tradition just infers that associations need to stay steady when they embrace any rule of
representing different periods (Drexler, Fischer and Schoar, 2014). At the point when the
organization's have settled approaches, it additionally turn out to be simple and straightforward
for the partners to utilize the money related articulations as against when the organizations
change the strategies consistently. This is on account of when the organization's stay consistent
for a more extended span it implies that organization's tasks are fruitful and they don't require
any adjustments in the arrangements. For example if the organization esteems the stock at the
market cost or cost whichever is less, at that point it ought to take after this standard for different
periods. So also, if some organization deteriorates the settled resources of the organization
utilizing straight line technique for devaluation, at that point the organization should utilize that
specific strategy for deteriorating every one of the benefits.
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CLIENT 1
Double entry book keeping system
This accounting system mainly associated with maintaining accounting information and
details in books of accounts for a particular duration and time. There are two major two sided
formates made as debit side and credit side. As per this concept every transaction contains two
aspects which affects the accounts. This is one of the essential accounting tool which follows the
following accounting equation as
Assets = Capital + liabilities
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CLIENT 2
a) Profit and loss statement
Profit and loss statement of Peter Piper for the year ended 31st December 2017
Particulars Amount Particulars Amount
To Opening stock 82200 By sales a/c 1215000
To wages and salaries (177500+1220) 178720
To Purchase a/c 778800
To Gross Profit 276920 By closing Stock 101640
1316640 1316640
To motor expenses 87400 By Net Profit 276920
To Heating and lighting 4950
To Depreciation
on freehold primes 4650
on equipments 7500
on Vehicle 2800 14950
To Advertisement expenses 4810
To administration expenses 17650
To net profit 147160
276920 276920
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