Financial Accounting Principles Report - Junior Accountant Role

This comprehensive report delves into the core principles of financial accounting, crucial for understanding a company's financial position and performance. It begins with an introduction to financial accounting, emphasizing its role in preparing financial statements and aiding decision-making. The report then explores the significance of both internal and external stakeholders, illustrating their interests and influence on business operations. Detailed examples, including journal entries and ledgers, are provided to enhance understanding. Furthermore, the report examines the preparation of profit and loss statements and balance sheets, along with accounting concepts such as consistency and prudence. It also explains the purpose and methods of depreciation. Finally, the report contrasts financial statements prepared by sole traders and limited companies, offering a comparative analysis. This report is designed to provide a solid foundation in financial accounting, making it an invaluable resource for students and professionals alike.

FINANCIAL
ACCOUNTING
PRINCIPLE
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Table of Contents
INTRODUCTION...........................................................................................................................3
BUSINESS REPORT......................................................................................................................3
1: financial accounting and its purposes......................................................................................3
2: Internal and External stakeholder............................................................................................4
Client 1.............................................................................................................................................7
Client 2...........................................................................................................................................11
Client 3...........................................................................................................................................16
Client 4...........................................................................................................................................18
Client 5...........................................................................................................................................18
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................21
Appendices....................................................................................................................................22
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INTRODUCTION
Financial accounting principles are the set of rules and regulations that helps to
understand the financial position of the company and gives idea to take next step to run the
business (Edwards, 2013). Moreover, it is the rules and guidelines that enterprises should be
follow at the time of preparing financial statements. KPMG is a professional UK based
accounting service company that provides tax and audit services. It is auditors company that is
dealing in auditing, tax and other advisory services. As a junior accountant of the company,
financial accounting principles helps to understand the inflow and outflow of any organisation.
The main purpose of this report is make understand the importance of financial accounting and it
purposes. Accounting principles and concepts defines goals and objectives of any organisation
and helps to take corrective decisions by using this. This report also would contain internal and
external stakeholders, purpose of control accounts, bank reconciliation statement and explanation
about term imprest and suspense accounts and its main features.
BUSINESS REPORT
1: financial accounting and its purposes
Financial accounting is the process of accounting and preparing financial statements of
any organisation that helps to define the financial performance and position of company.
Financial accounting provides a broad and accessible information to business enterprise that can
be used to improve the decision making quality and take better financial decision (Ahn, Amiti
and Weinstein, 2011). For example , a business enterprise is running a business and prepares
financial statements such as income statement and balance sheet that shows company's profits
and loss situation by defining income, expenditure, assets and liabilities. Financial accounting is
used for recording the transaction and bookkeeping. In other words, it is the specific branch of
accounting that keeps records and maintain financial information. By using standardized
principles and guidelines an organisation can record of financial transaction, present and
summarize in a financial statement. Financial statements includes trading, profit and loss account
and balance sheet. These final accounts helps to understand the profits and loss and also shows
the assets and liabilities of the company. Financial information is used to make effective
decisions by external users like as creditors and investors. The main object of financial
accounting is to provide clean and clear information regarding company's financial position and
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its performance that helps to make solid economic decisions. This also helps to take corrective
actions whether company need to run a business or not by seeking financial accounts. While
preparing final accounts an industry or company should follow GAAP (generally accepted
accounting principles) that is collection of accounting rules and principles for final reporting. It
is the duty of an accountant that follow rules and regulations which provides accurate and
relevant information it can be analysed. It provides a great methodology for recording monetary
transactions and impact on financial position of the enterprises. It has various purposes which are
as follows-
 The main purpose of financial accounting is to provide financial information which
includes income statement and balance sheet.
 To get true and fair data of final accounts of enterprises.
 To evaluate and analysis the fundamental financial statements.
 Financial accounting also helps to know the business's profitability situation as a result it
would be easy to make future plans and strategies for further growth of organisation.
 Its purpose is to accumulate and report on financial transaction and cash flows of a
business.
 This also helps to suggest that how to manages or control the business and organisation.
 To make effective and corrective economic decisions by using financial statements.
 It helps to give results of operations, cash flows and final position of the company.
 It maintains double entry system by using financial information.
 It provides a comparative data that helps to compare with past data and information.
 Financial information also helps to take taxation decision that is depend on business
income and assets.
 It also helps to give actual performance and business position of any business
organisation.
2: Internal and External stakeholder
Stakeholders means a person or group of people who has an interest in operations of the
company in order to make profits. In other words, it is the part of business who invests in the
organisation, participate in business activities and its decisions (Archer, Ahmed Abdel Karim
and Sundararajan, 2010). Stakeholders can affect by goals, objectives, actions and policies of
company. It helps to control external risk to improve business decision and outcomes. Every
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large organisation includes two types of stakeholders such as internal and external stakeholders.
They helps take effective or corrective decision in order to make profitable organisation.
Internal stakeholders: Internal stakeholders means entities or person who has vital
interest within business and its functions (Dyreng and Lindsey, 2009). In addition, an
organisation has people who are ready to serve a business as a staff, volunteers, donors and board
members. They formulates tactics, strategies, and operations activities to make profitable
organisation. It involves managers, board of director and employees whose have interest in the
financial information of the company such as:
Employees: Employees means a person or group of person who are working in
enterprises for getting something in monetary term like: wages, salary, bonus, incentives etc.
Employees are interested in financial information because they can analysis the pay ability and
employees benefits of any organisation (Edwards, 2013). Moreover, financial data gives an idea
to employees whether they should work or not in an enterprises. They might be interested in
financial information to assess the company's career development opportunities and expansion
possibilities of business. Employees can take further decision to be stable or not by getting
financial information.
Board of director: Board of director is the corporate body or group of people who
establish rules and policies of any business and take effective decisions with the consent of all
members: Board of directors are interested to get financial information because they are
responsible and liable for setting the business policy and accountable to shareholders for
financial position of the company (Fraser, Ormiston and Fraser, 2010). By getting financial
information BOD can take effective decision in order to make profitable industry. Financial data
provides budget that helps to board of director to make policies and further budgets.
External stakeholders: External stakeholders means an individual or group of people
outside a business who are affected by its business performance. It includes customer, regulators,
government, investors,creditors and suppliers. They might be interested in financial information
such as :
Government: Government is the group of people who has authority to govern a country
or state and make policies in order to development of the country (Hillier and et. al., 2013).
Government is interested to get financial information because it helps in development of the
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country by using tax amount. If financial position of the company would be good then it will pay
tax and this tax amount helps government authority to take development decision.
Investors: Investors means who invests money in the business of any organisation. They
are most interested person in financial information because it gives idea to investor for further
investment or not (Marshall, McManus and Viele, 2011). Investors also can measure the risk and
invest return in the company and also helps to assess the property of the company to pay the
invest amounts.
Creditors: Creditors means an individual or entity who lends money or give credit to
other person or enterprises (Needles and Powers, 2010). They are also interested in financial
information and statement in order to get back their credit money by assessing financial
information and wants to be full repay amount in certain period. Creditors may use financial
information to define business credit risk and company's ability to repay debt amount.
Suppliers: Suppliers means a person or enterprise who provides goods and services to
customer or others (Weil, Schipper and Francis, 2013). Suppliers might be interested in financial
information because they can see company's ability and stability to pay obligations or
compensation and check the profitability conditions of the company. In addition, Providers are
interested to get financial information to continue the purchasing system from organisation's
side.
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Client 1.
a. Journal Entries and Ledgers in the book of Alexandra Study:
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Books of accouting
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Client 2.
Q. (1). Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December
2018:
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Q.(2). Statement of financial position of Munteanu Ltd. As at 31st December 2018:
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