Financial Accounting Principles Assignment - Comprehensive Solution

This assignment solution provides a comprehensive overview of financial accounting principles. It covers key concepts such as financial accounting regulations, accounting rules and principles, and conventions. The solution includes detailed examples and practical applications through various client scenarios. These scenarios involve the preparation of books of prime entry, double-entry recordings in ledgers, trial balances, statements of profit and loss, statements of financial position, bank reconciliation statements, sales and purchase ledger control accounts, and suspense accounts. The document also explains accounting concepts like consistency and prudence, and methods of depreciation. Furthermore, it includes journal entries for rectifying errors and clarifying the use of control accounts. The assignment aims to provide a thorough understanding of financial accounting and its practical applications.

FINANCIAL ACCOUNTING
PRINCIPLES

Table of Contents
INTRODUCTION...........................................................................................................................5
A. (i) Financial accounting...........................................................................................................5
A. (ii) Explain the regulation relating to financial accounting....................................................6
A. (iii). Describe accounting rules and principles........................................................................8
A. (iv) Explain the conventions and concepts relating to consistency and material disclosure...8
B. CLIENT 1...................................................................................................................................9
(i) Books of prime entry...............................................................................................................9
(ii) Complete double entry recording in ledgers........................................................................11
(iii) Trial balance to check arithmetical accuracy......................................................................25
CLIENT 2......................................................................................................................................26
(A). Preparation of Statement of profit and loss acount............................................................26
(B). Preparation of Statement of Financial Position..................................................................27
CLIENT 3......................................................................................................................................28
(A). Preparation of statement of profit & Loss..........................................................................28
(B). Preparation of statement of SOFP, balance sheet...............................................................29
(C). Explaining the consistency and prudence accounting concepts.........................................30
(D). Briefly presenting the aim of depreication and two depreciation methods........................30
CLIENT 4......................................................................................................................................31
(A). Explaining the purpose of bank reconcilation statement....................................................31
(B). Listing several areas which may vary Cash book (bank column) & pass book balances. .31
(C). (i) Preparation of bank reconcilation statements on 1st December 2016............................32
(ii). Preparation of Kendal Ltd’s updated cash book for December 2016.................................32
(iii) Preparation of bank reconcilations statement as at December 2016...................................32
CLIENT 5......................................................................................................................................33

(A). (i). Preparation of Sales Ledger Control Account..............................................................33
(A). (ii). Preparation of purchase Ledger Control Account.......................................................33
(B). Explaining the term “control Account” & its uses.............................................................34
CLIENT 6......................................................................................................................................34
(A). Describing the term “suspense account” & its main features.............................................34
(B) Drafting a trial balance........................................................................................................35
(C). Prepration of Journal entries to show corrections & clear the suspense account...............35
(D). Differentiate between Suspense account and Clearing Account........................................36
CONCLUSION..............................................................................................................................37
REFERENCES..............................................................................................................................37

List of Tables
Table 1 Journal entry in Books of Alex for Month of May 2016...............................................................11
Table 2 Trial Balance of Alex...................................................................................................................25
Table 3 Statement of profit and loss acount of Peter Piper for the year ended 31st December 2016..........27
Table 4 Calculation of cost of goods sold..................................................................................................27
Table 5 Statement of financial position of Peter Piper as on 31st December 2016....................................27
Table 6 Statement of P&L of Raintree ltd for the year ended 30th September 2016.................................28
Table 7 Statement of SOFP of Raintree ltd as on 30th September 2016....................................................29
Table 8 Bank reconcilation statement of Kendal Ltd on 1st December 2016............................................32
Table 9 Kendal Ltd’s updated cash book for December 2016...................................................................32
Table 10 Bank reconcilations statement of Kendal Ltd as at December 2016...........................................32
Table 11 Sales Ledger control a/c of Henderson.......................................................................................33
Table 12 purchase Ledger Control Account of Henderson........................................................................33
Table 13 Trial balance...............................................................................................................................35
Table 14 Journal entries for rectifying errors.............................................................................................35
Table 15 Preparation of Suspense a/c........................................................................................................36
Table of Figures
Figure 1 Regulatory framework of financial accounting................................................................6
Figure 2 International standards of accounting..............................................................................7

INTRODUCTION
Businesses carry out number of transactions in a given reporting year, such activities held
during a year is recorded in a coherent and logical manner in the financial statements of the
enterprise. Financial Accounting (FA) is a process whereby accountant record the monetary
activities in the annual accounts, such as profit and loss statement, balance sheet and cash flow
statement to examine their return and financial health. It follows various concepts like accural,
double-entry, consistency, matching, monetary measurements and accounting standards i.e. UK
GAAP, IAS & IFRS. The current project mainly targeted at the preparation of various accounts
like P&L a/c, balance sheet, trial balance, rectification entries, control account & Bank
reconcilation statement (BRS) as well following the relevant accounting standards and
guidelines.
A. (i) Financial accounting
Financial accounting is the field of accounting that is concerned with the analysis,
examination, summarizing and reporting of the financial transactions conducted during the
business operations. It involves the construction of annual accounts, also called financial
statements i.e. statement of comprehensive income (SOCI), statement of financial position
(SOFP, balance/sheet), statement of cash flow (SOCF), statement of changes in retained earnings
along with the necessary notes representing the adopted accounting standards, conventions and
revenues and expendiure recognition principles (Deegan, 2013). The key aim behind the
financial accouting is to determine the net profitability and the financial status at te end of every
financial year. Such statements are created adopting accounting rules and standards such as UK
GAAP, IAS (International Accounting standards) & in the globalized era, multinational
companies publish their accounts in harmonized manner through following IFRS. Double entry
book-keeping system is followed by the establishments to prepare their accounts, wherein every
accounting activity is recorded in both the sides, credit and debit. It is essential to prepare
accounts because without arranging a proper record of the monetary activities held in the daily
operations, enterprise cannot examine their financial position i.e. solvency and liquidity as well
as organizational performance (Pratt, 2013). It not only helps the internal stakeholders such as
managers and employees but also assists outsiders such as government, shareholders, lenders,

creditors and other regulatory authority to gather required information for the rationalized
decision-making purpose. In UK, as per the Company Act, 2006, all the private as well as public
limited organizations are legally required to report their financial transactions in annual accounts
and publish it to communicate external users.
A. (ii) Explain the regulation relating to financial accounting
Figure 1 Regulatory framework of financial accounting
(Source: Deegan, 2013)
In UK, independent regulatory body, Financial Reporting Council (FRC) govern the
financial accounting practices by creating necessary rules and regulations. As per the regulations,
in UK, Generally Accepted Accounting Principles (GAAP) represents the local rules. it presents
the guidelines and accounting conventions which is required to be followed to report business
transactions in the annual accounts.

Figure 2 International standards of accounting
(Source: McAuley, 2015)
However, besides this, with the internationalization of the businesses, global accounting
standards, IAS and IFRS have been issued to ensure transparency in the system. Thus, as per
this, all the establishments who are working in more than one country must have to follow the
respective rules and standards while preparing their annual financial statements. The main aim of
this is to harmonize the accounting practices of multinational enterprise and build trust among
investors as they will be able to effectively examine the financial reports and made sound
investment decisions (Weil, Schippe and Francis, 2013). Company Act, 2006 also impose legal
requirement upon entities to construct SOCI, SOFP and SOCF using relevant standards and
guidelines and audit the statements by an independent auditor to make it sure that reported
information is truely correct and fair without any material misstatement. Apart from this,
organizations who are listed in recognised stock exchange like London Stock Exchange (LSE) is
require to follow the listing rules and as per this, they have to present their fianncial accounts to
the SE.

A. (iii). Describe accounting rules and principles
As said earlier that UK GAAP presents the conventions, principles and accounting rules
to guide accountatnts how the regular transactions will be reported in their financial statements.
The necessary rules and principles concerned with the accounting are mentioned here as follows:
Accural concept: This principles states that in the annual reports, transactions will be
record at the time of their occurence. There will be no effect of its cash generation or expenditure
occurence on the financial reporting. In other words, activities will be recorded when they held
irregardless of whether cash is received/paid or not (Saunders and Cornett, 2014).
Going concern: It assumes that business will continue its functions for long duration to
complete its committments and there is no probability of its liquidiation in foreseeable future.
This accounting principle allow the enterprise to defer several transactions like prepaid expense
and also amortize depreciation and others over a given period (Jollands and Quinn, 2017).
Matching principle: It matches the expenses incurred with the revenues because of
double-entry book keeping and accural accounting basis. For instance, sales commission must be
recorded at the time of sales instead of when the commission is actually paid to sales personnel.
Full disclosure: Corporations must record each and every information in their accounts
which are important for the stakeholders like lenders and investors in any way. Moreover, notes
also must be shown disclosing all the relevant principles and standards in footnotes to final
accounts, so that, investors can make better decisions (Gregory, Uys and Gregory, 2014).
Disclosing all the material statements or information is necessary otherwise, default person will
be penalised by fine and other lawsuit.
Monetary principle: In the financial statements, only those transactions are reported that
can be measured in monetary terms, GBP. Thus, it only provide quantitative results i.e. sales, and
cost and do not disclose any qualitative results and performance i.e. environmental performance
and others.
A. (iv) Explain the conventions and concepts relating to consistency and material disclosure
Accounting concepts postulates necessary assumptions upon which the entire accounting
and reporting is based. However, conventions represents customs that enable accountant to deal
with the practical accounting issue and problems. The consistency and material disclosure
concepts & conceptions are analyzed here as under:

Consistency: This principle state that the adopted accounting principles and methods will
be followed continually over the different finacial years untill and unless there is a sound reason
to use other standards and principles that will bring improvement in the current reporting system
(Giles, 2014). The most important benefit of this standard is it helps to compare performance
over the years.
Material disclosure: Accountants are allowed to exclude those items that are
insignificant, in this regards, whether an amount is material or immaterial will be decided on the
basis of professional judgement (Beatty and Liao, 2014). For instance, if a multinational entity
buys a printer costing 150GBP, as per the matching principle, it will be expensed over 5 year.
However, materiality principle here allows the accounatnt to violate the matching accounting
principle and charge thee entire cost in the same year instead of 5 year.
B. CLIENT 1
(i) Books of prime entry
Dr Cash a/c Cr
Date Particular Amount Date Particular Amount
01/05/16 To balance b/d 5600 04/05/16
Motor
expenses 470
07/05/16 Drawings 1500
31/05/16 By balance c/d 3630
5600 5600

Prime book entries shows the daily routine expenditures or income incurred in an entity
as this gives the actual expenses and income to be incurred in the business in a particular
financial year. Role of an entity gets increases when they prepare this compulsory kind of books
as this shows the overall performance of an entity within a given span of time (Beatty and Liao,
2014). The primary book entry includes sale ledger that records each and every sales in an entity
along with the purchases made by the firm. All these expenditures are managed with the help of
cash that maintains liquidity in the business in order to meet all kinds of problems imposed on an
entity.
(ii) Complete double entry recording in ledgers
Table 1 Journal entry in Books of Alex for Month of May 2016
Date Particular Debit Credit
May-2016
1th Storage a/c Dr 400
To bank a/c 400
(Being storage expenses paid by

cheque)
2nd Purchase a/c Dr 6080
To S.hood 1450
To D.Main 2060
To W.tone 960
TO R.Foot 1610
(Being goods Bought on credit)
3rd J.wilson a/c Dr 1120
T.Cole a/c Dr 1640
F.Syme a/c Dr 2080
J.Allen a/c Dr 910
P.White a/c Dr 2420
F.lane a/c Dr 770
To sales a/c 8940
(Being goods sold on credit)
4th Motor expense a/c Dr 470
To cash a/c 470
(Being motor expense paid by
cash)
7th Drawing a/c Dr 1500
To cash a/c 1500
(Being cash drawn by the owner
for its personal use)
9th T.Cole a/c Dr 680

J.Fox a/c Dr 1310
To sales a/c d 1990
(Being goods sale on credit)
11th Sales return a/c Dr 680
To J.Wilson a/c 270
To F.Syme a/c 410
(Being goods return by
suppliers)
14th Van a/c Dr 28500
To Abel Motor Ltd a/c 28500
(Being Van purchase on credit) d
16th Bank a/c Dr 1330
Discount allowes a/c dr. 70
To P.Mullen a/c 1400
(Being amount receiving from
P.Mullen after providing
discount)
16th Bank a/c Dr 2945
Discount allowes a/c Dr 155
To F.Lane a/c 3100
(Being amount receiving from
F.Lane after providing discount)
16th Bank a/c Dr 808
Discount allowes a/c Dr 42
To J.Wilson a/c 850

(Being amount receiving from
J.Wilson after providing
discount)
16th Bank a/c Dr 1587
Discount allowes a/c Dr 83
To F.Syme a/c 1670
(Being amount receiving from
F.Syme after providing
discount)
19th R.Foot a/c Dr 50
To purchase return a/c 50
Being return goods to R.foot
which were purchased) d
22nd Purchase a/c Dr 3740
To L.mole a/c 1830
To W.Wright a/c 1910
(Being goods purchase on
credit)
24th S.Hood a/c Dr 3600
To bank a/c d 3240
To discount receive a/c 360
(Being amount paid to the
S.Hood after availing discount
@ 10%)
24th J.brown a/c Dr 4600
To bank a/c 4140

To discount receive a/c 460
(Being amount paid to the
J.brown after availing discount
@ 10%)
24th R.Foot a/c Dr 1400
To bank a/c d 1260
To discount receive a/c 140
(Being amount paid to the
R.Foot after availing discount
@ 10%)
27th Salaries a/c dr. 4800
To bank a/c 4800
(Being salaries paid by cheque)
30th Business rate a/c dr. 1320
To bank a/c 1320
(Being business rate paid by
bank)
31st Abel Motors ltd a/c dr. 20500
To bank a/c 20500
(Being amount paid to Abel
Motors ltd by bank) d
Total 95590 95590
Evolution of Journal entry in the external business environment due to the launch of
Double entry book keeping system in which one transaction takes places in the business have
dual effects. Transactions or business event are recorded twice in the books of account by debit
or credit. There are three importance rules of accounting which are also regarded as one of the
important pillars of accounting such as debit what comes in and credit what goes out, debit the

receiver and credit the giver and last rule states that debit all expenses and losses and credit all
income s and gains. Accounting gets easy with the help of these three important rules that
facilitate an individual in order to consider each and every business transactions by giving dual
effect in the preparation of final accounts. Final accounts include income statements and balance
sheet prepared by an individual.
Dr Bank A/c Cr
Date Particular Amount Date Particular Amount
01/05/16 To balance b/d 62400 01/05/16 Storage a/c 400
16/05/16
To P.Mullen
a/c 1330 24/05/16 S.Hood 3240
To F.Lane a/c 2945 R.Foot 1260
To J.wilson a/c 808 J.Brown 4140
To F.syme a/c 1587 27/05/16 By salaries 4800
30/05/16
By business
rates 1320
31/05/16
By Abel
motors 20500
31/05/16 By balance c/d 33410
69070 69070

Dr R. Foot a/c Cr
Date Particular Amount Date Particular Amount
19/05/16
To purchase
return a/c 50 02/05/16 By purchase 1610
24/05/16 To bank a/c 1260
24/05/16
To discount
receive a/c 140
31/05/16 To balance c/d 160
1610 1610
J. Wilson account
Date Particulars Amount Date Particulars Amount
03/05/16 To sales 1120 By sales return 270
16/05/16 By bank 808
16/05/16
By discount
allowed 42
1120 1120

S. Hood a/c
Date Particulars Amount Date Particulars Amount
24/05/16 To bank a/c 3240 01/05/16
By balanace
b/d 2150
24/05/16
To discount
receive a/c 360 01/05/16 By purchase 1450
3600 3600

(iii) Trial balance to check arithmetical accuracy
Table 2 Trial Balance of Alex
Particular Debit Credit
Owner's capital 529000
premises 340000
Van 79750
Fixtures 8100
Inventory 63900
Cash in hand 3630
Cash at bank 33410

Storage a/c 400
Purchase a/c 38320
Purchase return 50
Reecipt 7020
Payment 30100
R.Foot a/c 160
Sales a/c 10930
Motor expense a/c 470
Drawing a/c 1500
Sales return a/c 680
Abel Motor Ltd a/c 8000
Discount allowed a/c 352
Discount receive a/c 960
Salaries a/c 4800
Business rate a/c 1320
F.Lane 770
Miscellaneous income 20772
Total 591812 591812
CLIENT 2
(A). Preparation of Statement of profit and loss acount
Peter Piper is a sole proprietor who prepare their annual accounts to determine their
financial position and operational return by SOCI and SOFP. P&L statement comprises all the
expenses incurred and revenue generated from the operational activities to know the net return.

Table 3 Statement of profit and loss acount of Peter Piper for the year ended 31st December 2016
Particulars
Amount (In
GBP)
Sales 1215000
Less: Cost of sale (Working note: 1). 938080
Gross profit (GP) 276920
Less: Other expenses
Motor expense 87400
Admin expense 17650
Heating and lighting 4950
Advertisement expense 13280
Less: Prepaid advertisement 8470 4810
Depreciation
Freehold premises @ 2% 5400
Equipment @ 10% 17250
Motor vehicles @ 20% on NBV 2800 25450
Total operational expenditures 140260
Net profitability (NP) 136660
Table 4 Calculation of cost of goods sold
Particulars
Amount (In
GBP)
Opening inventory 82200
Add; Purchase 778800
Add: wages and salaries 177500
Add: Outstanding wages & salaries 1220 178720
Less: closing inventory 101640
Cost of goods sold 938080
(B). Preparation of Statement of Financial Position
SOFP reports assets & liabilities to know the financial status and health of the enterprise
at the end of FY (Henderson and et.al., 2015).
Table 5 Statement of financial position of Peter Piper as on 31st December 2016
Particulars
Amount (In
GBP)
Current assets
Inventory 101640
Trade receivables 106960
Cash in hand 2440

Prepaid advertisement 8470
Total current assets 219510
Non-current assets
Freehold premises 270000
Less: Accumulated depreciation
(37500+5400) 42900 227100
Equipment 172500
Less: Accumulated depreciation
(97500+17250) 114750 57750
Motor vehicles 28000
Less: Accumulated depreciation
(14000+2800) 16800 11200
Total non-current assets 296050
Total assets 515560
Current liabilities
Payables 76910
Bank overdraft 11290
Outstanding wages & salaries 1220
Total current liabilities 89420
Non-current liabilities 0
Total liabilities 89420
Net assets 426140
Financed by
Owner's capital contribution 332120
Less; Drawing 42640
Add: profit for the current year 136660 426140
CLIENT 3
(A). Preparation of statement of profit & Loss
Raintree Limited is a retailer that provides retailing services to the consumers its annual
financial accounts has been constructed here below:
Table 6 Statement of P&L of Raintree ltd for the year ended 30th September 2016
Particulars
Amount (In
GBP)
Sales 107000
Less: return inward 2000
Net sales 105000
Less: Cost of sale
Opening stock 17000

Add; Purchase 32000
Less: closing inventory 18000
Cost of goods sold 31000
Gross profit (GP) 74000
Less: Other expenses
Administration cost 28000
Add: Accrued salary 2000
Less: prepaid rent 3000 27000
Distribution costs 22000
Depreciation
Building (50000/50 years) 1000
Plant and machinery 10000 11000
Total operational expenditures 60000
Earnings before interest & taxes(EBIT) 14000
less: Interest 0
Earnings before taxes 14000
Less: corporate taxes 4000
Net income /Earning after taxes 10000
(B). Preparation of statement of SOFP, balance sheet
Table 7 Statement of SOFP of Raintree ltd as on 30th September 2016
Particulars
Amount (In
GBP)
Current assets
Inventory 18000
Trade receivables 24000
Prepaid rent 3000
Total current assets 45000
Non-current assets
Land and building (10000+50000) 60000
Less: Accumulated depreciation
(7000+1000) 8000 52000
Plant and machinery 65000
Less: Accumulated depreciation
(15000+10000) 25000 40000
Total non-current assets 92000
Total assets 137000
Current liabilities
Trade payables 14000
Outstanding salary 2000
Tax due 4000
Bank overdraft 15000

Total current liabilities 35000
Non-current liabilities 0
Total liabilities 35000
Net assets 102000
Financed by
Share capital @ 1GBP each 50000
Add: Share premium 20000
Add: retained earnings 22000
Add: profit for the current year 10000 102000
(C). Explaining the consistency and prudence accounting concepts
Consistency concept: This principle of accounting presents that once adopted &
implemented accounting principles will be followed continually over the different finacial years
untill and unless there is a sound reason to use other standards and principles that will bring
improvement in the current reporting system. The most important benefit of this standard is that
it helps to compare the business performance over number of years.
Prudence concept: This concept demonstrates that overestimation of the business
revenues and underestimation of expenditures must be avoided, also called conservatism
principle (Gregory, Uys and Gregory, 2014). Thus, in this way, it focuses on accurate reporting
of the transactions in the annual accounts. It states that expenditures and liabilities must be
recorded as soon as their occurence whereas revenues means earnings only will be recorded
when they realized.
(D). Briefly presenting the aim of depreication and two depreciation methods
Fixed assets like plant and machinery, equipment and others values came down over the
years due to its use. Therefore, companies need to charge depreciation on such assets in order to
match its costs with the revenues receipts by its use (Del Giudice, Manganelli and De Paola,
2016). It helps to reflect the correct value of assets at the end of the reporting year by disclosing
it at cost net of depreciation. There are two methods which can be used for the purpose of
depreciation, presented below:
Straight Line method (SLM): In this method, every year depreciation is charged at the
original costs of the assets at which assets has been bought from the vendor. It means, a fixed
amount of depreciation is charged every year (Küpper and Pedell, 2016).

Written down value (WDV) : Unlike SLM, this method charge depreciation at original
costs net of depreciation, called WDV. In other words, every year, the value of depreciations
came down as it is charged on WDV.
CLIENT 4
(A). Explaining the purpose of bank reconcilation statement
Bank reconcilation staement (BRS) is a statement that is constructed to match the balance
between cash book (bank column) and the pass book that is prepared by the bank. Many-times, it may be
possible that both the balance do not perfectly matches with each other. Therefore, at the end of every
month, these accounts are matched by preparing BRS which clearly presents the causes of differences in
both the accounts balances and match it (Ahmed, 2016). The key objective of preparing BRS is to
indicate those item which causes differences in the bank column of the cash book and bank’s pass book.
BRS make it sure that all the payments have been processed and all the collection of cash items had been
accurately recorded and deposited into bank. Thus, it mitigate the differences in both the accounts and
match them perfectly.
(B). Listing several areas which may vary Cash book (bank column) & pass book balances
There are many reasons which might cause differences, which in turn, bank’s pass book
and balance of bank column of the cash book may vary from each other. Some of the most
commonly occuring balances are presented here as under:
 Cheque issued by the Kendal Ltd to the bank but not yet presented to the bank: If
company issued a cheque for payment and the same amount is credited into the bank
column of cash book for that cheque. If such cheque is forgotten to be presented or
presented after the month ending date then definitely, the same entry will not be made in
the bank’s pass book therefore, balances will be differ (Ahmed, 2016).
 Cheque deposited into bank but not yet collected: For instance, if Kendal Ltd
presented a cheque for deposits into the bank and with the same amount, cash book (bank
column) is debited on that day. However, if the amount is still not collected by the bank
than no entry will be recorded in the pass book as a result, differences will be arise.
 Bank charges: If bank deducted any charges like standing charges, interest and others,
then pass book balance will be decrease however, as customer will be unaware therefore,
no entry will be made in cash book and reflect different results.

(C). (i) Preparation of bank reconcilation statements on 1st December 2016
Kendal Ltd is a organization whose bank and cash book (bank column) reflects difference in
balances therefore, in order to match both the balances, BRS is prepared here as under:
Table 8 Bank reconcilation statement of Kendal Ltd on 1st December 2016
Particulars
Amoun
t
Credit balance as per pass book on 1st Dec. 2016 17478
Less: Cheque issued but not presented to the bank
Cheque no. 780 426
Cheque no. 781 737 1163
Add: Deposits 176
Debit balance as per cash book (Bank column) 16491
(ii). Preparation of Kendal Ltd’s updated cash book for December 2016
Table 9 Kendal Ltd’s updated cash book for December 2016
Particulars Amount
Credit balance as per pass book on 31st Dec. 2016 19738
Less: Cheque issued but still not has been presented into bank
Cheque no. 783 (Burgass) 9
Cheque no. 785 (Cook) 97
Cheque no. 787 (Rent) 260 366
Add: Cheque not yet deposited by bank 119
Add: cash sales cheque wrongly entered by 1 GBP (529-528) 1
Add: Charged deducted by bank 47
Standing charged deducted by bank but not entered in cash book (bank
column) 137
Cheque forgotten to be entered in cash book 297
Debit balance as per cash book (bank column) on 31st December 2016 19973
(iii) Preparation of bank reconcilations statement as at December 2016
Table 10 Bank reconcilations statement of Kendal Ltd as at December 2016
Date Particulars
Amoun
t Date Particulars
Amoun
t
31st Dec.
2016 To balance b/d 19973 5-Dec Bank charges 47
6-Dec Cheque no. 783 9
10-
Dec Standing charges 137
17-Dec Cheque no. 785 (Cook) 97 23- Cash sales 1

Dec
29-Dec Cheque no. 787 (Rent) 260
30-
Dec
Cheque not
deposited 119
30-
Dec Cheque not entered 297
To balance c/d 19738
20339 20339
CLIENT 5
(A). (i). Preparation of Sales Ledger Control Account
Sales Ledger Control (SLC) account, also called as accounts recievables/Trade debtors
control account is a statement that shows the outstanding amount of debtors. The statement
presents credit notes, invoices and amounts of receipts by posting into it from the debtors ledger
(Saunders and Cornett, 2014).
Table 11 Sales Ledger control a/c of Henderson
Date Particulars
Amount
(£) Date Particulars
Amount
(£)
2016
1st
May
To balance b/d
(Opening Balance) 12600 By bad debts w/off 120
To credit sales a/c 152350 By discount allowed a/c 380
By sales return a/c 7320
By cash a/c (customers
receipts ) 141610
By purchase ledger control
a/c 330
By balance c/d 15190
164950 164950
(A). (ii). Preparation of purchase Ledger Control Account
Purchase Ledger Control (PLC) account reports the amount for which Henderson is liable
towards its suppliers/trade payables. In opposed to SLC, it disclose information regarding
supplier invoices, credit notes & the payments made to them. It helps to know the net amount
oustanding to the creditors.

Table 12 purchase Ledger Control Account of Henderson
Dat
e Particulars
Amoun
t
(£) Date Particulars
Amount
(£)
To discount received a/c 290
2016
1st
May
By balance b/d(Opening
balance) 9160
To purchase return a/c 1110 By credit purchase a/c 116500
To cash a/c (payment to
suppliers) 101010
By refunds from the
suppliers 400
To sales ledger control a/c 330
To Balance c/d (Amount
due) 23320
126060 126060
(B). Explaining the term “control Account” & its uses
Control account can be defined as a summarized account in general ledger. Its detailed
information is available in the subsidiary ledger that is a ledger different from general ledger
(GL). The key objective of such account is to maintain GL disclosing only summarized
information that is free fromd detailed information (Beatty and Liao, 2014). For instance, the
accounts recievable control account represents only the collection, sales, allowances and the
balance due from the debtors. In this, detailed information about each & every customer will be
available in recievables subsidiary ledgers. It is of great utility for the internal decision-makers,
for instance, Henderson’s credit collection department can just use the SLC and PLC a/c to
identify the total outstanding amount that is expected to be recieve from the debtors and needs to
be pay to the suppliers. With the help of this, they can design rationalized policies like credit
decisions & others to maintain a right balance between cash collection from debtors and
payments to suppliers for the purpose of sound liquidity management (Bullivant, 2016).
CLIENT 6
(A). Describing the term “suspense account” & its main features
Suspense account is an account wherein transactions are recorded temporarily such as
doubtful earnings and discrepancies in spending. It is opened if trial balance fails to match the
total of both the debit and credit sides, called one-sided error and indicates inaccuracy in the

journal entries and its posting into ledger (Henderson and et.al., 2015). Thus, by opening this
account, entity can match their debit and credit side balances.
Characteristics and usefulness of suspense account:
 It enable enterprise to know the total sum of errors made before in the transactions
recording period and which needs to be rectify to ensure arithmetical accuracy.
 It helps to reflects the different type of accounts in which accounting entries have been
made wrongly and should be rectify now (Weil, Schipper and Francis, 2013).
 It assist in preparation of financial account along with ensuring simultaneously checking
of the errors made.
(B) Drafting a trial balance
Trial balance is a summarized statements of all the ledger balances either debit or credit
prepared with the aim of discovering the arithmetical accuracy (Deegan, 2013). It either can be
prepared following total method or balance method. In the former, ledger totals are recorded in
both the sides whilst in the later, only the balance whether debit or credit is shown in the trial
balance.
Table 13 Trial balance
S. No. Particulars L. F Debit Credit
1 Purchase a/c 700
2 Sales a/c 1100
3 Rent a/c 250
4 Cash at bank 840
5 Travel expense a/c 160
6 Receivables a/c (320+220) 540
7 Payables a/c 350
8 Capital a/c 710
9 Suspense a/c 330
Total 2490 2490
(C). Prepration of Journal entries to show corrections & clear the suspense account
Table 14 Journal entries for rectifying errors
Date Particulars L. F Debit Credit
Simon a/c Dr. 220
To Smith a/c 220

(Smith's account was debited at a sale of 220
instead of Simon)
Jones a/c Dr. 420
To suspense a/c 420
(Sale worth 420 corrected credited into sales
account but Jones account has been forgotten
to entered)
Suspense a/c Dr. 750
To White's a/c 750
(Purchase worth 750 correctly entered into
purchase but forgotten to entered in White's
account)
Total 1390 1390
Table 15 Preparation of Suspense a/c
Date Particulars Amount Date Particulars Amount
To white's a/c 750 By balance b/d 330
By Jones a/c 420
750 750
(D). Differentiate between Suspense account and Clearing Account
Suspense account is an account that is opened due to one-sided error in the trial balance.
However, clearing account is a temproary account that records such items like costs until it can
be transferred elsewhere. Both the accounts resembles another one in several respects as both
these maintain temproary records. However, both the account perform different functions.
clearing account is opened in order to post the item later making it sure that every item is
recorded correctly. On the other side, Suspense account is opened when a matching problem is
detected in the trial balance (Adkins, 2013). Thus, it record the amount that is needed to be
rectify thus, until the problem is resolved, this account holds the error. In other words, suspense
account is used to deal with the uncertainities. However, in contrast to this, accountant make
clearing accounts till the time of transferring the temproary amount into permanent ones. For
instance, it may be used to record trade recievables till the time when the payment arrives from
the debtors. Both the accounts are accounted with zeroed balance at the end means by making
rectifying entries, suspense account balance is removed and by posting the item into permanent
ledger, clearing account balance is cleared to nil.

CONCLUSION
The above project report concluded that financial accounting not only assist internal
policy-makers but also used by the outsiders like shareholders, lenders and many others for the
purpose of examining business position & making sound decisions. The report clearly presented
the accrual, prudence, consistency, monetary measurements etc. are the basis of preparation of
annual accounts. Besides this, BRS is prepared so as to match the differences in the pass book &
bank book’s balances. Apart from this, control account provided the summarized information to
the managerial team without any detailed data set for the right decision making. At the end,
suspense and clearing account has been distinguished as first is prepared due to one-sided error
in the trial balance whereas later is prepared temproarily till the time to transfer an item to its real
permanent ledger.
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