Report on Financial Accounting Principles, Rules, and Regulations

This report provides a detailed explanation of financial accounting principles, covering various concepts, rules, and regulations. It highlights the debit and credit rules, consistency, and material disclosure concepts. The report includes practical applications through financial statements like profit & loss statements, bank reconciliation statements, and trial balances for multiple clients. It discusses the role of the International Accounting Standard Board, the Statement of Principles, and specific accounting rules like debiting the receiver and crediting the giver. Furthermore, it delves into accounting principles such as the matching principle and historic cost principle, alongside conventions like consistency and materiality disclosure. The report also addresses the purpose of depreciation and methods for calculating it, ending with the importance of bank reconciliation statements and areas causing differences in cash and bank books.

Financial Accounting Principles
1

Contents
Introduction.................................................................................................................................................3
PART A.......................................................................................................................................................4
Introduction.............................................................................................................................................4
1. Define financial accounting.............................................................................................................5
2. Explain regulations related to financial accounting.........................................................................5
3. Describe accounting rules and principles.........................................................................................6
4. Explain the conventions and concepts related to consistency and material disclosure.....................7
Conclusion...............................................................................................................................................8
Client 1........................................................................................................................................................9
Client 2......................................................................................................................................................16
Client 3......................................................................................................................................................18
Client 4......................................................................................................................................................21
Client 5......................................................................................................................................................23
Client 6......................................................................................................................................................24
Conclusion.................................................................................................................................................26
Bibliography...............................................................................................................................................27
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Introduction
The report deals with the explanation of financial accounting principles. With this various
concepts, rules and regulations which are associated with it are also highlighted. The financial
statements including profit & loss, bank reconciliation statement and trail balances are also
equipped so that the practical perceptive of it can be gained.
3

PART A
Introduction
The part of report explains about the debit credit rules that can help in predicting the actual
performance with this it also explains about the principles and conventions related to consistency
and disclosure of all materials.
4

1. Define financial accounting
The financial accounting helps in tracking the financial transactions of organization. These
financial transactions are recorded and presented in the financial reports which help the
managers of organization to take the financial decisions. The statements which are prepared to
record the financial transactions are the income statement, balance sheet, profit & loss statement
and the cash flow statement (Tools, 2018). These statements are used by the managers of the
organization to evaluate and determine the financial performance and the position of
organization. The main standard which is used is the generally accepted accounting principles
which are also known as the GAAP. These statements are prepared so that the clients.
Employees, stakeholders and investors can take the strategic decisions for the organization. The
financial accounting is different from the management accounting as the management accounting
helps the insiders to take the decisions but the financial accounting helps the outsider managers
to take the strategic decisions (Mamić Sačer, 2015). It helps in maintaing the capital within the
organization so that the operations of organization can go smoothly. The international financial
standards are the one which is used by all the organizations but with this thee local standards are
also used which are prevalent within the country. The components of the financial accounting are
used so that the cash can be tracked and the revenues of the organization can be increased which
in turn helps in maximizing the profits of organization (Ribeiro, 2016).
2. Explain regulations related to financial accounting.
The regulations of the financial accounting are mandatory for all the organizations to follow so
that the standard reporting can be done and the comparison of the financial accounts can easily
be predicted (Ribeiro, 2016). It also provides the real picture of financial position.
International Accounting Standard Board: These are the statements which are prepared so
that the transparency and the accountability can be maintained within the financial framework of
the organization (Onuoha, 2012). It was founded on April 1, 2001 with the International
accounting standard committee. The main aim of these standards is to develop the interest of
public to maintain the high quality of standards by making it understandable (Onuoha, 2012).
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Statement of Principles: The statement of principles is the one which plays the vital role so that
the equality and diversity can be promoted within the organization (Mamić Sačer, 2015). These
are used by the accounting standard board so that the betterment for the policies and methods can
be maintained. These principles help in rethinking for the various policies of the organization so
that sufficiency and the integrity can be maintained within the organizational context. These
specially help the accountants of the organization for resolving the issues which are faced by
them so that the effectiveness within the organization can be maintained (Onuoha, 2012).
3. Describe accounting rules and principles.
The accounting rules and principles help in ensuring that the double entry book keeping is done
in the appropriate manner so that the accountability within the financial transactions can be
maintained. The accounting rules are:
 Debit the receiver and credit the giver: This approach is basically used in the personal
account which believes that the inflow of cash in the organization is debited and the
outflow is credited (Tools, 2018).
 Debit what comes in credit what goes out: All the transactions which shows that the
amount has been received are debited and the transactions which shows that there is the
outflow of cash is credited. This concept is used in case of the real accounts.
 Debit all losses and expenses and credit all income and gains: This is the nominal
account which uses the expenses, losses and income of the organization (Mamić Sačer,
2015). When the expenses are reduced it means that the profit of the organization is
impacted thus these are debited while when the incomes are received the profit is
increased and thus these transactions are credit as they increase the revenue of the
organization (Donelson, 2016).
Accounting Principles:
Matching Principle: The matching principle states that all the transactions which are related to
the expenses should match the revenues so that the balances of debit and credit can be matched.
Both the expenses and the incomes should be recorded in the same period. There the cost and the
expenses should not have the effect relationship with the sales and revenues.
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Historic Cost Principle: It states that all the items related to the cost have to be recorded by the
organization. No cost should be left behind to be recorded. It shows that the assets should be
recorded at the amount of cash at the time when the assets are required (Mamić Sačer, 2015).
The assets should not be recorded when the settlement for that is made but should be recorded at
the time of purchase (Ribeiro, 2016).
4. Explain the conventions and concepts related to consistency and material disclosure.
Consistency Concept: It states that the organization should maintain the consistency for the
future accounting periods so that the consistency in the recording can be made and the
comparison with the future trends can easily be done by the managers of the organization for
evaluating the performance (Donelson, 2016).
Materiality Disclosure: All the materials which are used in the organization should be recorded
in the proper manner so that the investors and the outsiders can take the decisions related to
investment in particular firm. This is the convention which is used within the organization to
disclose all the materials in the financial accounts of the organization (Mamić Sačer, 2015).
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Conclusion
It reveals that the financial statements are necessary for the organization so that the long term
objectives of the organization can be determined and the decisions related to the future can be
taken. The rule and principles are necessary to use by all the organizations so that the debit
balance can be matched with the credit one and then those can be posted to their respective
accounts.
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Client 1
I)
In the books of Alexandra
For the year ended January 2018
Date Particulars Debit Credit
1-Jan-
18
Storage Expenses A/C
Dr.
400
To Bank A/C 400
(For Storage Cost paid by Cheque)
2-Jan-
18
Purchases A/C
Dr.
6080
To S. Hood 1450
To D. Main 2060
To W. Tone 960
To R. Foot 1610
(For goods purchased on credit)
3-Jan-
18
J. Wilson A/C
Dr.
1120
T. Cole A/C
Dr.
1640
F. Syme A/C
Dr.
2080
9

J. Allen A/C
Dr.
910
P. Whilte A/C
Dr.
2420
F. Lane A/C
Dr.
770
To Sales 8940
(For goods sold on credit)
4-Jan-
18
Motor Expenses A/C
Dr.
470
To Cash 470
(Being motor expenses paid)
7-Jan-
18
Drawings A/C
Dr.
1500
To Cash 1500
(For cash withdrawal for personal use)
9-Jan-
18
T. Cole A/C
Dr.
680
J. Fox A/C
Dr.
1310
To Sales 1990
(Being goods sold on credit to both)
11-Jan-
18
Sales Return A/c
Dr.
680
To J. Wilson 270
To F. Syme 410
(Being sold goods returned)
14-Jan-
18
Van A/C
Dr.
28500
To Abel Motors Limited 28500
(For purchased Van on credit)
16-Jan-
18
Bank A/C
Dr.
7020
Discount allowed A/C
Dr.
511
To P. Mullen 1400
To F. Lane 3100
To J. Wilson 850
To F. Syme 1670
To Receivables 511
(Being discount given and receivables paid)
19-Jan-
18
R. Foot A/C
Dr.
50
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To Purchase Return 50
(Being goods returned to R. Foot)
22-Jan-
18
Purchases A/C
Dr.
3740
To L. Mole 1830
To W. Wright 1910
(Being goods purchased on credit)
24-Jan-
18
J. Brown A/C
Dr.
4600
S. Hood A/C
Dr.
3600
R. Foot A/C
Dr.
1400
Payables A/C
Dr.
976
To Bank A/C 9600
To Discount received 976
(Being discount received on purchases)
27-Jan Salaries A/C
Dr.
4800
To Bank A/C 4800
(Being salaries paid by cheque)
30-Jan-
18
Business Rates A/C
Dr.
1320
To Bank A/C 1320
(Being business rates paid)
31-Jan-
18
Abel Motors Ltd. A/C Dr. 20500
To Bank A/C 20500
(Being paid to Abel Motors)
II)
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