Financial Accounting Project 1: Sole Traders and Limited Companies

This financial accounting project provides a detailed examination of the fundamental concepts and practices within financial accounting. It begins with the application of the double-entry bookkeeping system, including the recording of journal entries and the preparation of ledger accounts. The project then moves on to the creation of a trial balance, utilizing the information from the ledger accounts. Subsequently, the project focuses on the preparation of profit and loss accounts and balance sheets, based on the trial balance data. Furthermore, the project extends to producing financial accounts for both sole traders and limited companies, demonstrating the differences in financial reporting. The project includes all the necessary calculations, along with the final financial statements, and concludes with a detailed summary and references.

FINANCIAL ACCOUNTING
PROJECT 1

Table of Contents
INTRODUCTION...........................................................................................................................1
PROJECT 1......................................................................................................................................1
TASK 1............................................................................................................................................1
P1: Apply the double entry book keeping system and record journal entries and prepare ledger
................................................................................................................................................1
P2: Preparation of trial Balance with the application of ledger accounts...............................3
TASK 2............................................................................................................................................4
P3: Preparation of profit and loss accounts and balance sheet by using the trial balance .....4
P4: Produce financial accounts For sole traders and limited companies................................5
CONCLUSION................................................................................................................................7
REFERENCES ...............................................................................................................................8

INTRODUCTION
Financial accounting is a process that is related with the preparation of financial
statements of the company such as balance sheet, profit and loss account , cash flow statement
etc. so that the managers of the company can take decisions regarding the company. The main
purpose of financial accounting is to provide the stakeholders with the necessary information
regarding the financial position of the company.
PROJECT 1
TASK 1
P1: Apply the double entry book keeping system and record journal entries and prepare ledger
Date Particulars Debit Credit
1 June, 2016 Bank account 65000
To capital account 65000
2 June, 2016 Purchases account 8000
To trade payable account 8000
7 June, 2016 Cash account 4000
To Sales account 4000
8 June, 2018 Trade payable account 4000
To Bank account 4000
14 June, 2018 Prepaid Insurance account 75
To Bank account 75
15 June, 2018 Trade receivable account 12000
To Sales account 12000
16 June, 2018 Purchases account 10000
To trade payable account 10000
18 June, 2018 Equipment account 3000
To Cash account 3000
20 June,2018 Prepaid Rent account 150
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To Bank account 150
21 June, 2018 Cash account 10000
To Sales account 10000
25 June, 2018 Cash in hand account 100
To Bank account 100
30 June, 2018 Stationary account 30
To cash in hand account 30
Total 116355 116355
Cash account
Particulars Debit amount Particulars Credit amount
Sales account 4000 Equipment account 3000
Sales account 10000 Stationary account 30
Bank account 100 Balance c/d 11070
Total 14100 Total 14100
Bank account
Particulars Debit amount Particulars Credit amount
Capital account 65000 Account payable account 4000
Prepaid insurance account 75
Prepaid rent account 150
Cash in hand account 100
Balance c/d 60675
Total 65000 Total 65000
Capital account
Particulars Debit amount Particulars Credit amount
Balance c/d 65000 Bank account 65000
Total 65000 Total 65000
2

Purchases account
Particulars Debit amount Particulars Credit amount
Trade payable account 8000 Balance c/d 18000
Trade payable account 10000
Total 18000 Total 18000
Trade payable account
Particulars Debit amount Particulars Credit amount
Bank account 4000 Purchase account 8000
Balance c/d 14000 Purchase account 10000
Total 18000 Total 18000
Trade receivable account
Particulars Debit amount Particulars Credit amount
Sales account 12000 Balance c/d 12000
Total 12000 Total 12000
Sales account
Particulars Debit amount Particulars Credit amount
Balance c/d 26000 Cash account 4000
Trade receivables account 12000
Cash account 10000
Total 26000 Total 26000
Prepaid Insurance account
Particulars Debit amount Particulars Credit amount
Bank account 75 Balance c/d 75
Total 75 Total 75
Equipment account
Particulars Debit amount Particulars Credit amount
3

Cash account 3000 Balance c/d 3000
Total 3000 Total 3000
Prepaid Rent account
Particulars Debit amount Particulars Credit amount
Bank account 150 Balance c/d 150
Total 150 Total 150
Stationary account
Particulars Debit amount Particulars Credit amount
Cash account 30 Balance c/d 30
Total 30 Total 30
P2: Preparation of trial Balance with the application of ledger accounts
Trail balance
Particulars Debit Credit
Cash account 11070
Bank account 60675
Capital account 65000
Purchases account 18000
Trade payable account 14000
Trade receivable account 12000
Sales account 26000
Equipment account 3000
Prepaid Insurance account 75
Prepaid Rent account 150
Stationary account 30
Total 105000 105000
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TASK 2
P3: Preparation of profit and loss accounts and balance sheet by using the trial balance
Income statement For the year
ended 31st December 2017
Revenue:
Sales 125000
less: returns 1500
123500
LESS: COGS 83500
Interest received 1000
Rent received 4850
Gross profit 45850
Expenses:
Rent and rates 1500
postage 900
Insurance 7500
Bad debts 1200
Depreciation 5000
Wages and salaries 13200
To provision for bad debts 934
Less: Bad debts written off 650 284
Outstanding expenses 340
Interest before Interest and
taxes 15926
Balance Sheet as at 31st December 2017:
Equities and Liabilities AMOUNT Assets AMOUNT
Capital 120800 Bank balance 10594
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Less: Drawings 5150
Creditors
Rent received in advance
Reserves
Suspense account
115650
3900
490
15926
7489
Cash
Debtors
Motor van 25000
less: Acc. Depreciation 5400
Prepaid insurance
Loan given
340
12500
19600
411
100000
143455 143445
P4: Produce financial accounts For sole traders and limited companies
Financial statements of the limited companies:
The income statements are prepared by the limited companies in an order which is preseted
below:
CONSOLIDATED STATEMENT OF FINANCIAL ACTIVITIES
(including the income and expenditure account) for the year ended 31 March 2017
Unrestricted Restricted Total Total
funds 2017 funds 2017 2017 2016
Note £’000 £’000 £’000 £’000
Income and endowments
from:
Donations and legacies 2 438 3,263 3,701 4,236
Other trading activities 3 154 - 154 112
Investments 4 32 - 32 26
Income from charitable
activities:
Grant funding for specific 5 4,323 35,941 40,264 40,904
charitable activities
Total income and
endowments 4,947 39,204 44,151 45,278
Expenditure on:
Raising funds 6 (229) (12) (241) (331)
Charitable activities:
Changing lives through media
and
communication:
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Africa 6 (1,422) (13,256) (14,678) (18,072)
Asia 6 (1,398) (12,865) (14,263) (13,782)
Rest of World 6 (1,131) (9,324) (10,455) (8,316)
Cross-cutting activities 6 (379) (3,747) (4,126) (3,452)
Total expenditure on
charitable (4,330) (39,192) (43,522) (43,622)
activities
Total expenditure 6 (4,559) (39,204) (43,763) (43,953)
Net income for the year 7 388 - 388 1,325
Reconciliation of funds
Total funds brought forward 6,513 34 6,547 5,222
Total funds carried
forward 17, 18 6,901 34 6,935 6,547
The preparation of balance sheets are prepared by the limted companies in the manner which are
prsented under this method(Glover, 2014):
CONSOLIDATED AND BBC MEDIA ACTION BALANCE SHEETS
at 31 March 2017 Group Group Charity Charity
2017 2016 2017 2016
Note £'000 £'000 £'000 £'000
Fixed assets
Tangible assets 10 - - - -
Investments 11 - - 23 23
Total fixed assets - - 23 23
Current assets
Debtors 12 6,205 7,202 6,094 7,546
Cash at bank and in hand 13 12,801 9,573 12,638 8,951
Total current assets 19,006 16,775 18,732 16,497
Liabilities
Creditors: amounts falling
due within one
14 (11,383) (9,825) (11,132) (9,570)
year
Net current assets 7,623 6,950 7,600 6,927
Total assets less current
liabilities 7,623 6,950 7,623 6,950
Provisions for liabilities 15 (688) (403) (688) (403)
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Net assets 6,935 6,547 6,935 6,547
Funds
Unrestricted funds 17,18 6,901 6,513 6,901 6,513
Restricted funds 17,18 34 34 34 34
Total Funds 17,18 6,935 6,547 6,935 6,547
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2017 Total 2017 Total 2016
Notes £'000 £'000
Net cash inflow/from operating activities 20 3,187 451
Returns on investments and servicing of
finance
Interest received 32 26
Financing activities
Sale of tangible fixed assets 9 -
Increase in cash in the year 3,228 477
Cash at the start of the year 13 9,573 9,096
Cash at the end of the year 13 12,801 9,573
CONCLUSION
It has been concluded from the above report that the preparation of accounts such as
journals, ledger and trail balance is done in this report which assists the companies in the taking
certain decision regarding the operations of the company.
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