Financial Accounting Principles: A Comprehensive Report

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Financial Accounting Principles
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Table of Contents
(a) Development of a report to be an evidence to show that the company is aware regarding the
regulations that exist within accounting in addition to accounting rules, accounting conventions
along with accounting principles.....................................................................................................3
(b) Recording and completion of the tasks given based on the given client portfolios for the
catering of the differing financial requirement of clients................................................................6
Reference List................................................................................................................................24
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(a) Development of a report to be an evidence to show that the company is aware regarding
the regulations that exist within accounting in addition to accounting rules, accounting
conventions along with accounting principles
Introduction
The report will be dealing with discussions on wide-ranging financial accounting terms,
conventions, rules and regulations along with illustrating what financial accounting and what its
objectives are.
1. Define financial accounting and its purpose.
The procedure, which is followed and utilised within organisational contexts so that they can be
keeping a record of the myriad of economic transactions resulting within them via business
operations, thereby reporting and summarising them, is known to be ‘financial accounting’
(Kimmel et al., 2016). The objectives of the utilisation of financial accounting are wide in nature
(Macve, 2015). Below is the list of five primary financial accounting purposes -
 To develop an understanding of the performance that a business has had in a specific time
span while assessing its current financial standing
 To satisfy the needs of each of its stakeholder groups through providing financial
information that is of relevance to them
 To report and summarise myriad of monetary transactions in a business
 To ensure that each of the legal and the regulatory requirements in businesses for the
presentation of their financial positions to the government
 To act as a basis for forecasting or anticipating future performance and prospects of a
business
2. Explain the regulations relating to financial accounting.
The entire field of financial accounting is dependent over a number of regulations, which are
ought to be used when financial accounts of a business corporation are being created. However,
there is a distinction among financial accounting associated regulations that business
corporations follow depending upon countries. This is because in the US, business corporations
are to perform financial accounting based over the US GAAP (Turlington et al., 2019).
Conversely, in the Australia, business corporations are to perform financial accounting based
over the ones set by the “Australian Accounting Standard Board” or the AASB (Handley et al.,
2019).
However, when it comes to business corporations within the UK to perform financial accounting,
regulations that are mentioned within the “Generally Accepted Accounting Principles” and the
“Companies Act 2006” is needed being followed (Elshandidy et al., 2015). At the same time,
regulations are governed by the FRC of the country, which is known as the “Financial Reporting
Council”, when it comes to the reporting of the financial accounts of business corporations in the
country. A difference can also be noticed when it comes to the application and presence of
regulations to carry out financial accounting in the UK for differing industries. This is because
business corporations in the banking industry along with the finance industry within the UK are
to adhere by the regulations stated under “Financial Services and Markets Act 2000”. In this
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way, regulations in the UK for financial accounting might be differing in case of differing
industries.
3. Describe at least 10 accounting rules and principles that govern the presentation and
preparation of the financial statements.
As a field, financial accounting encompasses a large number of principles and rules. A primary
element in the financial accounting as a field is the “golden rules of accounting” (Bratianu,
2018). This element puts forward 3 major rules associated with accountancy and they include the
below -
 “Giver must be credited and receiver must be credited” - for personal accounts
 “What comes in has to be debited and what goes out needs being credited” - for real
accounts
 “Losses and expenses need being debited and vice versa” - for nominal accounts
Below is a list of 7 other principles that are connected to financial accounting -
 Acting as a chief accounting principle, the accrual principle mentions the need of
maintenance of financial transactions in business corporations only when they take place
instead of their record keeping when cash is achieved from it (Van Zyl, 2015).
 Another widely followed accounting principle, called the cost principle says that equity
investments, assets along with liabilities and financial obligations are needed being taken
into record depending upon their original cost of acquirement (Zimmerman and Bloom,
2016).
 Economic entity principle could be referred as the one that states that business
corporations are entirely of separate existence and not same as its owners, business
partners or any other related body (Udachyna et al., 2017).
 Materiality is also a principle that business corporations utilise. It is related with
ascertaining a business corporation’s nature, size as well as relevance related to economic
transactions that are reported to its financial reports (Lai et al., 2017).
 Yet another principle is the going concern principle, which assumes that there is going to
be a continuation of the operations and activities of a business entity in successive
periods as well (Akamah et al., 2019).
 Conservative principle could be referred as one of the general concepts wherein there is
acknowledgment of liabilities and expenses as soon as possible whenever there is
uncertainty linked to the outcome (Dutta and Patatoukas, 2016). However, assets or
revenues are to acknowledge only when there is certainty of their receipt.
 Lastly, matching principle acts as a direction to business corporations for expensing on
its statement of income within the period under which the associated sales revenues are
earned (Pehlevan and Chklovskii, 2016).
4. Explain the conventions and concepts relating to consistency and material disclosure.
Consistency, as a concept within accounting, indicates that as soon as a business corporation
chooses one accounting principle or any accounting method, it must be ensuring that there is a
continuation maintained of the adopted principle and method and no amendments must be
brought about unless there takes place an enhancement of the corporation’s financial reporting
(Mio, 2016).
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Material disclosure, conversely, indicates to a convention based on which it is the fundamental
need of a business corporation to ascertain the disclosure of all sorts of material facts associated
with it so that the exact financial condition at which it is standing can be achieved (Bottum,
2018).
Conclusion
Thus, from the report, one can develop an in-depth knowledge as well as understanding over
financial accounting along with its varying aspects.
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(b) Recording and completion of the tasks given based on the given client portfolios for the
catering of the differing financial requirement of clients
Client 1
i. The book of prime entry
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ii. Complete double entry recording within the relevant ledgers.
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iii. To close each account and draw the trial balance at 31st July 2018 to check the
arithmetical accuracy of the double entry system
Serial
Number
Name of Account Folio Amount
(Debits)
Amount
(Credits)
1 Fixtures Account - £
10,000.00
2 Van Account - £
64,920.00
3 Cash Account - £
350.00
4 Premises Account - £
200,000.00
5 Sundry debtors' Account - £
4,761.00
6 Bank Account - £
32,980.00
7 Sundry creditors' Account - £
9,600.00
8 Returns from purchase Account - £
500.00
9 Returns from sales Account - £
1,780.00
10 Salary Account - £
4,800.00
11 Owners' Capital Account - £
353,111.00
12 Sales Account - £
14,130.00
13 Storage Cost Account - £
800.00
Total £
377,341.00
£
377,341.00
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