Financial Accounting Principles: Client Case Study Report Analysis

This report delves into the core principles of financial accounting, providing a comprehensive overview through practical examples and client case studies. It begins with a definition of financial accounting, its purpose, and the various users of financial statements, including internal and external stakeholders. The report then explores key concepts such as journal entries, ledgers, and trial balances, illustrated with detailed examples from client companies. It covers the preparation of financial statements like the Statement of Profit and Loss and the Statement of Financial Position, along with discussions on accounting principles, depreciation methods, bank reconciliation, and control accounts. The report also includes examples of the Imprest system in petty cash books and suspense accounts, offering a practical understanding of accounting procedures. Overall, the report serves as a valuable resource for understanding financial accounting practices and their application in real-world scenarios.

Financial Accounting
Principles

Table of Contents
INTRODUCTION...........................................................................................................................1
Financial Accounting:......................................................................................................................1
Financial Accounting:..................................................................................................................1
Purpose:........................................................................................................................................1
Users Of Financial Accounting: ..................................................................................................3
CLIENT 1........................................................................................................................................4
Journal Entries and Ledger in the book of Alexandra Study.......................................................4
Ledgers.........................................................................................................................................4
Trial Balance as at 31st January 2019 in the books of Alexandra Study:....................................9
Trial Balance as at 31st January in the books of Alexandra study............................................10
CLIENT 2......................................................................................................................................11
Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018........11
Statement of Financial Position of Munteanu Ltd. As at 31st December 2018.........................11
Accounting Principles:...............................................................................................................12
Purpose and Methods of Depreciation:......................................................................................12
CLIENT 3......................................................................................................................................13
Bank Reconciliation Statement: ................................................................................................13
Imprest system in petty cash book: ...........................................................................................13
Bank Reconciliation Statement as at 30 September 2018.........................................................14
CLIENT 4......................................................................................................................................14
Control Accounts:......................................................................................................................14
Ledger Control Accounts in the books of Hilly:........................................................................15
CLIENT 5......................................................................................................................................15
Suspense Account: ....................................................................................................................15
Journal Entries:..........................................................................................................................16
Trial balance...............................................................................................................................16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................18

INTRODUCTION
The process of financial accounting is that collects and compiles financial data to
prepare and describe financial statements and reports such as balance sheet and income
statements for the management, lenders, investors, tax authorities, suppliers and other
stakeholders of the establishment(Abela and et.al, 2014). The overall motive to follow the
process of financial accounting is for generating the fund related statements or information that
can be utilised by external users as well as internal users to make their financial decisions.
For the better understanding of financial accounting and its principles, a junior
accountant of an accounting firm has prepared a report which covers the definition and
explanation of financial accounting, users and purpose of financial accounting, basic principles
of it by the help of some practical accounting statements of client companies.
Financial Accounting:
Financial Accounting:
Financial accounting is the field of accounting that mentions for collecting, recording,
summarizing and presentation of the financial data and information deriving from business
operations and transactions (Financial Accounting 2019). In broader terms, financial
accounting is a manner of reporting financial information and business actions to creditors,
investors and other persons outside the business. It find out the operational profit and the worth
of the business to the concerned individuals. It can be said that financial accounting is used for
presenting financial transactions to the stakeholders in a format that is acceptable and adaptable
by all businesses.
Purpose:
The objectives, functions or purpose of financial accounting can be described as under:
Planning: It is essential for the organizations to plan the structure to allocate and assign
their limited and valuable resources such as cash, materials, labour, equipment and machinery
towards competitive requirements in upcoming period. The utilisation of various types of
budgets may be an effective manner to fulfil the purpose. Financial statements enable
enterprises to develop plans by evaluating business resources and necessities.
Decision: Financial accounting assists the management in making developing policies
and business decisions to create more expeditious process of the establishment . Some
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illustrations related to managerial strategies which are supported by accounting data, involve
pricing policies for products and services, financing policies, investment strategies, product
development policies, credit terms for customers, etc.
Performance: Accounting related to finance provides help in deciding well effective
performance of the business by summarizing and analysing the financial content into standard
measurements and quantifiable (Carnegie and O’Connell, 2014). It is crucial for establishments
to manage a trustworthy informant of evaluating their main objectives so that they may
enhance their effectiveness by examining themselves against competitors and against their own
past performance as well.
Position: Financial statements, generated in this process, indicate the financial
perspective of an organization. Financial condition shows the fiscal status of an organization at
that period of time and also defines the condition of capital investment, utilisation of funds,
cumulative profit and loss, business liabilities and debts, liquidity position of the firm and other
material terms.
Control: One of the major prime objectives of a financial accounting method is to
maintain adequate controls in the organizational environment for the protection of limited and
valuable resources. Financial accounting checks that various hazards are reduced and under-
controlled to an satisfactory level across the business (Deegan, 2017). Organizational assets are
sensitive and may be lost because of theft, error, fraud, obsolescence, mismanagement and
damage. Accounting policies of an organization may require administration to make sure the
reliability and reduce the risk of fraud.
Accountability: Financial accounting renders a base for execution analysis of an
organizational entity over a time slot which encourages reliability across various levels of an
establishment. Directors can be hold by the other stakeholder to make responsible for the
efficiency of the entire organization.
Legal: Financial accounting is a lawful demand for the organizations. It is crucial for
the organizations to follow the required law, regulations and legislations to keep an overall
adequate financial record of their operations and to represent their overall outcomes to the
external as well as internal stakeholders of the establishment (Albu, Albu and Alexander,
2014).
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Users Of Financial Accounting:
Different groups of stakeholders need financial statements and for their specific
requirements. There are two types of users or stakeholders that demands for financial
statements which can be defined as below:
Internal Stakeholders:
Owners: Because of having investment of their earnings in the firm, the main interest of
shareholders and owners in financial documents is to evaluate the interest on the investment
they have made and how prosperous do they appear for the future. Owners generally have
access to all financial statements, records and files.
Management: The managerial department of a business needs to determine the cash
flows, profitability and liquidity of the firm for an accounting period so that operational,
functional and financial decisions of the organization can be made successfully (ë l Houdet and
Germaneau,2014). Management will also have access to all records.
External Stakeholders:
Competitors: The organizations which are in competition against a other similar firms
working in the same industry endeavour to attain the reach to the financial information of the
rival establishments in relation to examine their economic situation. This could be used to draft
necessary competitive strategies.
Customers of the business: When a client or customer considers that which service
provider should be selected for huge projects, firstly it needs to evaluate the financial accounts
of all the organizations working in the same sector so that they can evaluate the financial
strength and capability of that business entity to survive in the industry for so long period that it
can provide the services or products mentioned in the agreement.
Government: An organization has to present its financial statements to the regulatory
authorities under which an establishment is situated when the governing body requests for the
same so that it can examine whether the entity is paying true value of taxes to the department
and relevant laws are being followed by the firm.
Analysts: External analysts want to examine the fund or money related documents and
reports of every organization so that they can decide whether the securities of the organization
is recommendable to their clients or not. Auditors will also need to analyse financial records so
that reliability and accuracy of the firm can be checked.
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CLIENT 1
Journal Entries and Ledger in the book of Alexandra Study
Ledgers
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5

Storage Cost A/c
Date Particulars Amount Date Particulars Amount
01/07/19 To Bank A/c 450 31/07/19 By Profit & Loss A/c 450
Total 450 Total 450
Sales A/c
Date Particulars Amount Date Particulars Amount
31/01/19 To Trading and
P&L A/c
11460 03/01/19 By J Wilson A/c 1200
By T. Cole A/c 1650
By F. Syme A/c 2100
By J .Allen A/c 1020
By P .White A/c 2520
By F .Lane A/c 980
09/01/19 By T .Cole A/c 680
By J fox A/c 1310
Total 11460 Total 11460
S Hood A/c
Date Particulars Amount Date Particulars Amount
24/01/19 To Bank A/c 3600 01/01/19 By Opening Balance
(B/f)
12150
02/01/19 By purchases A/c 1450
31/01/19 To Closing
Balance C/d
10000
Total 13600 Total 13600
W Tone A/c
Date Particulars Amount Date Particulars Amount
31/01/19 To Closing 960 02/01/19 By purchases A/c 960
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Balance C/d
Total 960 Total 960
J Wilson A/c
Date Particulars Amount Date Particulars Amount
03/01/19 To Sales A/c 1200 11/01/19 By Sales Return A/c 270
16/01/19 By Bank A/c 850
31/01/19 By Closing Balance
c/d
80
Total 1200 Total 1200
F Syme A/c
Date Particulars Amount Date Particulars Amount
03/01/18 To Sales A/c 2100 11/01/19 By Sales Return A/c 410
16/01/19 By Bank A/c 1670
31/01/19 By Closing Balance
c/d
20
Total 2100 Total 2100
P White A/c
Date Particulars Amount Date Particulars Amount
03/01/19 To Sales A/c 2520 31/01/19 By Closing Balance
c/d
2520
Total 2520 Total 2520
P Mullen A/c
Date Particulars Amount Date Particulars Amount
01/01/19 To Opening 4400 16/01/19 By Bank A/c 1600
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Balance (B/f)
31/01/19 By Closing Balance
c/d
2800
Total 4400 Total 4400
Capital A/c
Date Particulars Amount Date Particulars Amount
07/01/18 To Cash A/c 1500 01/01/18 By Opening Balance
b/f
389000
31/01/18 To Closing
Balance C/d
387500
Total 389000 Total 389000
J Allen A/c
Date Particulars Amount Date Particulars Amount
09/01/18 To Sales A/c 1310 31/01/18 By Closing Balance
c/d
1310
Total 1310 Total 1310
Motor Van A/c
Date Particulars Amount Date Particulars Amount
01/01/19 To Opening
Balance (B/f)
51250 31/01/19 By Closing Balance
c/d
51250
Total 51250 Total 51250
Salaries A/c
Date Particulars Amount Date Particulars Amount
27/01/19 To Bank A/c 4800 31/01/19 By Trading and P&L
A/c
4800
Total 4800 Total 4800
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Motor Expenses A/c
Date Particulars Amount Date Particulars Amount
04/01/19 To Cash A/c 70 31/01/19 By Trading and P&L
A/c
470
Total 470 Total 470
Trial Balance as at 31st January 2019 in the books of Alexandra Study:
Trial Balance for the month of July..........
Particulars Debit Credit
Storage Cost 450
Purchase 9820
Sales 11460
Motor Expenses 470
Receivables:
P Mullen 3000
F Lane 3980
J Wilson 80
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T Cole 2330
F Syme 20
J Allen 1020
P. White 2520
J Fox 1310
Cash At Bank 52680
Cash In Hand 20200
Payables:
S. Hood 10000
J. Brown 12000
W Tone 960
R Foot 160
L Mole 1830
W. Wright 1910
D Main 2060
Premises 240000
Van 51250
Fixtures 8100
Inventory 23900
Sales Return 680
Purchase Return 50
Salaries 4800
Business Rates 1320
Capital 387500
Total 427930 427930
Trial Balance as at 31st January in the books of Alexandra study
W. Wright 1910
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