Financial Accounting Principles Report: A Detailed Analysis

This report provides a comprehensive overview of financial accounting principles, covering various aspects such as the meaning of financial accounting, associated regulations, accounting principles and conventions, and the concept of consistency and materiality. It delves into journal entries, double-entry bookkeeping, trial balances, and the formulation of financial statements. The report analyzes sales and purchase transactions, profit and loss statements, and the bank reconciliation process. It includes examples and case studies, such as the preparation and balancing of books for a company, and discusses suspense accounts and control accounts. The report also covers accounting conventions and concepts like money measurement and conservatism, offering a detailed analysis of the practical application of accounting principles in business operations. The report is aimed at providing a comprehensive understanding of accounting principles and their practical application within a business context.

Financial Accounting
Principles

Table of Contents
INTRODUCTION...........................................................................................................................1
Business Report...............................................................................................................................1
(a): Meaning of financial accounting.....................................................................................1
(b): Regulation associated with financial accounting.............................................................2
(c): Accounting principles and regulations.............................................................................3
(d): Accounting convention and concept of consistency and materiality...............................4
CLIENT 1: Journal Entries..............................................................................................................5
P1: Detail data regarding double entry bookkeeping.............................................................5
P2: Concept of trail balance and their balancing regulations...............................................14
M1: Analyse sales and purchase transactions to compile a trail balance.............................15
D1: Recording of transaction accurately into the trail balance............................................15
CLIENT 2......................................................................................................................................15
P3: (a): Development of final account and associated trail balances...................................15
CLIENT 3......................................................................................................................................16
P4: Formulation of financial statements and large number of examples.............................16
M2: Analysis of profit and losses statement and other financial account............................19
D2: Application of accurate calculation for the final account..............................................19
CLINET 4......................................................................................................................................19
P5: Bank reconciliation process...........................................................................................19
M3: Apply reconciliation process........................................................................................20
D3: Formulation of BRS......................................................................................................20
CLIENT 5......................................................................................................................................21
P6: Prepare and balance the books of Henderson................................................................21
D4: Produce various accounts that have been use for reconcile the statements...................22
CLINET 6......................................................................................................................................23
Suspense account and reconcile control accounts................................................................23
M4: Understanding of various types of accounts.................................................................23
CONCLUSION..............................................................................................................................24
REFERENCES..............................................................................................................................25

INTRODUCTION
Finance is considering as one of the crucial aspects for an organisation. It is uses for the
purpose of making effective planning and allocating future aims and objectives within an
accounting period of time. It is known as of the vital field of accounting those are concerned with
the summary, analysing and reporting financial transaction in pertaining to all business
transaction those are discussed during the period of time. This project report is all about various
crucial aspects those are associated with accounting principles.
All necessary financial statements those are prepared by the company can be analyse by
using appropriate tools and techniques. This consist of formulation of financial records that are
available for public consumptions. Overall this report guides an organisation to attain more
reliable outcome in case all statements are providing sufficient amount of gain in coming period
of time. Analysis of bank reconciliation is done effectively in order to determine total cash
balance of the company (Scott, 2015).
Business Report
(a): Meaning of financial accounting
Financial accounting is one of the special branch of accounting which track of overall
financial transactions that are done within an organisation. It is used to be based on certain
guidelines, transactions that are recorded, summarise and present in preparation of financial
statements. With this all relevant data associated with the financial condition and position of the
company easily be analyse in effective manner. This information is then after use by different
investors and stakeholder those are connected with the company in order to make relevant
decision regarding, whether to make invest in future projects of a company. The financial
statements also aid overall supplies in deciding, whether sufficient amount of raw material is
being provided by the company through judging their overall condition in effective manner. This
financial report is done with use of certain goals that are based on overall profitability of an
organisation (Agoglia, Doupnik and Tsakumis, 2011). The various companies select various
accounting systems that are prepared by using standard bodies such as IFRS etc. Financial
accounting that is being done in order to keep in views that standards and their duties of
managers to be shown in financial statements of the company. Some crucial statements are
discussed underneath:
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Income statements: According this accounting reports a company’s financial
performances during a particular period of time. It has been assessing by using a summary of
business activities that are incurs their earning and expenses from various activities such as
operating and non-profit aspects. It assists companies in evaluating, whether the company is
making earning, profit and losses. The transactions related to operating gains, gross and net profit
are determining in overall profit and loss statements of the company.
Balance sheet: This seems to be one of the crucial statements of the company which used
to provide specific information about all detail aspects of assets and debt a company is having
with them. By using this statements, financial position and stability in respect to other company’s
positions are taken into account (Zeff, 2016). Financial organisation and other stakeholder
determine their financial statements for providing sufficient loans and investing in the
companies.
Cash flow statements: This seems to be one of the crucial statements which will be used
to determine inflows and outflows from various activities of an organisation that are collected
from various operating activities, investing and financing activities. This statements enable
managers to detect the overall fluctuations of cash during accounting period of time.
Changes in statement of equity: It is known as more similar statements of alteration of
all necessary changes in partner’s equity for a various taxpayer’s equity for a government
financial reports. It records all necessary changes that are done in capital balance of an
organisation over a given period of time.
(b): Regulation associated with financial accounting
Financial accounting standards is concern with private, non-profit organisation those are
setting bodies. Their role is to establish and make modification in GAAP as per the interest of
public. Regulators used to apply those two effective system for managing and controlling about
operators report their financial outcomes during an accounting period of time. There are no any
current legal needs that a companies used to report on extent to which their activities are
harmony with essential demand or sustainability development. Current reporting and practices
are having only more connection with overall sustainability of an organisation. However, UK
system reports on progresses towards attempts to incorporate overall needs of sustainability into
the economic overall life of reports (Horngren and et. al., 2012). The financial data users are very
wide and diversified range as per the financial accounting. Because of such modification the data
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needed to every individual is required for plenty of ways. To maintain all rules and regulations,
various regulatory bodies are created by following IASB etc. The ASB is another important
accounting norm which are used by the company during formulation of financial reports. These
standard used to provide accounting regulation that can assist managers and accountant in
formulating financial records through using financial data of the company
(c): Accounting principles and regulations
In every business organisation, it is based on various common rules and regulations that
are being adopted or proposed by using certain guidelines those are needed to be taken during
formulation of appropriate statements. There are various rules and concepts that are govern
appropriate accounting. It consists of major three rules that basic accounting principles and
regulations, the detailed rules and policies those are being issued by FASB and their predecessor
the accounting principles board. It every industry distributes their financial statements to public,
it is needed to implement GAAP principles during formulation of various statements. Further, in
case company overall stock is publicly traded and required financial records be audited by a
skilled accountant (Warren and Jones, 2018). Below mentioned various accounting principles
and guidelines together are discussed effectively. Some of them are:
 Cost principles: As per as accountant is concern, they used to consider cost as those
amount which is spent during an items were originally obtained. For this particular
reason, the total value indicates on financial statements those are referred to be recorded
on historical cost basis. Hence, an assets amount does not reflect the total amount of
income a company which will be receive if it is sell the asset at current period of time.
 Full disclosure principles: there are certain information which is to be made by
investors through using financial statements that data would be disclosure within
prepared statements. It is related with basic accounting aspects that taken as for attaining
more suitable results in coming period of time. It is requirements that are related with
publicly traded companies those are releasing and provide free exchange of facts that are
relevant to their continuing business operations.
 Going concern principles: This types of accounting aspects assumes that a company will
continues to exist for longer period of time in order to attain their aims and objectives
into the allotted time frame. In case accountant believe that, the condition of company is
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not so effective then the accounting books of that particular companies accounting books
are closed for next coming time.
 Matching principles: This accounting principles need for companies to make use of
accrual basis of data. This particular principle need that all expenses to be matched with
total earnings of the company. It cannot be measure the future economic benefits of all
things like advertisement the accountant charges (Henderson and et. al., 2015).
Regulations and rules:
There are certain accounting rules which will be consider for effective recording of
financial transactions those are done within an accounting period of time. Some of them are
mentioned underneath:
 Personal account: It is known as one of the effective account which is being used by an
individual for that persons that are own requirements. The accounting rules says that
debit the receivers and credit all amount to givers. Some crucial examples, capital and
drawings.
 Real account: Such kind of account is related with nature of assets those are used by an
organisation. As per this rules, debit what comes in and credit all values those are goes
out during the period of business operations.
 Nominal account: This seems to be utmost important financial transactions that are done
at the time of every financial period. The rules provide information about debits all
expenses and losses and credit all incomes and profit.
(d): Accounting convention and concept of consistency and materiality
It is known as common aspects of accounting that are used for the recording of a business
transactions. It is helpful in those situations which is not having any kind set guidelines in
accounting standards that are govern during period of time. There are various effective types of
accounting conventions that are held responsible for betterment the growth and gainfulness for
an organisation. Some of them are:
Consistency: It would be required to select most appropriate accounting tools and
techniques that are made for the adjustments on regular basis. Alteration can only be done in
which new methods it adopted by the company (May, 2013). There are certain examples that are
being consider for examine overall strength and financial position of the company.
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Materiality: This seems to be one of the effective accounting conventions which are
consider for making influenced the economic decision of users. This concept is universally
attainable that all material aspects are to be disclosed by the company. This would be applied
through the applied auditors in planning and evaluation the audit and in analysing effect for
determining misstatements on report of the statements.
Concepts:
There are various concepts that being followed by the accountant within an accounting
period of time. Some of them are discussed underneath:
 Money measurement: It refers as money measurement concepts that used to guide
business only for the purpose of recording accounting transactions if it can be mentioned
in respect to overall capital. In case products are cannot be recorded as accounting
transactions because they cannot be able to state in respect to money.
 Conservatism: This conservatism concept is basically related with that concepts in more
common aspect for recognizing expenses and debts that are possible in uncertainty
regarding various results that are attain during the period of time. In accounting, the
convention of conservatism is associated with the policy of anticipating best possible
losses during the future of aims (Mulford and Comiskey, 2011).
CLIENT 1: Journal Entries
P1: Detail data regarding double entry bookkeeping
In accounting terms double entry system of accounting means that every business data. It
means that every transaction will be associated with at least two account effects. If company
used to borrow money from the banks, they overall asset increase total liability as net payables is
increased effectively. A fundamental aspect for underlying effect in day to day bookkeeping and
accounting detail aspects those are related with financial transaction has opposite effects in at
least two various account. Every transaction need to satisfy below equation:
Asset= Liabilities + Equity
Date Particular Debit
(Amount)
Credit
(Amount)
01/05/16 Store expenditure A/c............... Dr
To Bank A/c......................CR
400
400
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(Being payment is made through using cheques)
02/05/16 Purchase Account ….....................Dr
To Creditor.........................Cr
(Goods purchase on credit)
6080
6080
03/05/16 T. Cole A/c...............................Dr
J. Allen A/c................................Dr
F. lane A/c.................................Dr
J. Wilson A/c.............................Dr
F. Syme A/c................................Dr
P. white A/c................................Dr
To Sales account.............................Cr
(Being goods sold on credit)
1640
910
770
1120
2080
2420
8940
04/05/16 Motor expenses A/c.......................................DR
To cash A/c........................Cr
(Being payment is made through cash)
470
470
07/05/16 Drawings Account.........................................Dr
To cash account.............................................Cr
(As cash goes out from business in related to make
payment for personal use)
1500
1500
09/05/16 J. Fox A/c.....................................Dr
T. Cole A/c...................................Dr
To Sales A/c...................................Cr
(Selling of products on credit)
1310
680
1990
11/05/16 Sales outward A/c.........................Dr
To F. Syme A/c........................Cr
To J. Wilson A/c.......................Cr
(Being Creditor return their merchandise)
680
410
270
14/05/16 Van A/c.............................Dr
To Able motor Ltd A/c..................Cr
28500
28500
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(As products are brought on credit)
16/05/16 Bank A/c.............................Dr
To F. Lane A/c.............................Cr
To P. Mullen A/c.........................Cr
To J. Wilson A/c..........................Cr
To F. Syme A/c.............................Cr
Discount allowed A/c..............Dr
To J. Wilson.............................. Cr
F. Syne.,,................................Cr
F. Lane...................................Cr
P. Mullen.................................Cr
(Being deduction allowed to the creditors)
6670
352
2945
1330
808
1587
44
84
155
70
19/05/16 R. Foot A/c.............................Dr
To Purchase outward
account............................Cr
(Being return goods to R. foot)
50
50
22/05/16 Purchase A/c.................................Dr
To W. Wright.................................Cr
L. Mole......................................Cr
(Goods are brought on credit)
3740
1910
1830
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24/05/16 J. Brown A/c.....................................Dr
S. Hood A/c.......................................Dr
R. Foot A/c........................................Dr
To Bank A/c.....................................Cr
R. Foot A/c...................................Dr
S. Hood A/c..................................Dr
J. Brown A/c.................................Dr
To Discount receive A/c................Cr
(Being certain amount of discount is received and
payment made with 10 %)
4140
3240
1260
140
360
460
8640
960
27/05/16 Salary A/c.....................Dr
To Bank A/c..................Cr
(Being commerce of salaries is successful by the usage
of cash)
4800
4800
30/05/16 Business Rate A/c..........................Dr
To bank A/c...................................Cr
(Being enterprise rates are cashed through cheques)
1320
1320
31/05/16 Able motors A/c......................Dr
To Bank A/c.........................Cr
(Motor expenditure paying through cheque)
20500
20500
Ledger posting
It is utmost crucial process that is being done to record all effective financial entries into
various statements. This seems to be needed in other stage in accounting period which is being
post the entries in respect to analyse all implications that are seen in near future. The major
source of financial report preparation is taken from journal entries those are made within the
internal department of the company. Posting is more common means for transferring all financial
entries into joural into their respective accounting books. A ledger is consider main accounting
aspects whcih are responsible for recording of all associated measure that re sufficient enough to
get more reliable outcomes in coming period of time. Investors uses these ledger account details
to increase overall profitability position of the company (Renz and Herman, 2016).
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