Financial Accounting: Recording, Reporting, and Analysis

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Financial Accounting
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Table of Contents
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................4
Task 2.............................................................................................................................................11
Task 3.............................................................................................................................................19
Task 4.............................................................................................................................................24
Conclusion.....................................................................................................................................29
References......................................................................................................................................30
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Introduction
The term “Financial Accounting” is a vital thing that is used by the companies and business
entities to record the daily transactions in the “books of accounts”. These are done in the process
of “double entry book keeping”. These are vital for the companies to perform as they provide the
position of finance for the companies that can be seen by the entities and as well as the general
people. These are very important so that the actual position of the company can be seen. These
help the business entities to record all the daily activities related to the finance of the company.
The project will outline the different requirements of the books of accounts that are being
followed by the companies. The books of accounts consist of “journal, ledger, trial balance,
profit and loss account, cash flow statement and the balance sheet”. These are very important for
the companies and the business entities to perform so that there are no problems in the
companies and the daily financial activities are recorded. There will be a presentation of the
“bank reconciliation statement” and the reasons of preparing a “bank reconciliation statement”
will also be provided. These will give a clear picture of the financial accounting in details.
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Task 1
Record business transactions using double entry book-keeping, and be able to extract a
trial balance
Introduction
This part of the project will outline the different grass root activities that are performed by the
companies. These are vital for the companies to perform in a “double entry book keeping”
system. This part of the report will consist of the “journal entries, ledger accounts and the trial
balance” of the transactions that happen on a daily basis. A trial balance will be performed from
the balance that is provided to get the owner’s capital. After this, the ledger account will be
formed to incorporate the additional information and adjust the accounts. After this is done a new
trial balance will be produced from the new balance that is received from the ledger accounts.
Finally, the journal entries that consist of the adjustment entries will be posted.
Balance as on
31st December, 2018
Assets Amount (£)
Premises 340000
Van 51250
Fixtures 8100
Inventory 63900
Receivables
P Mullen 1400
F Lane 3100
Cash at Bank 62400
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Cash in Hand 5600
Liabilities Amount (£)
Payables
S. Hood 2150
J. Brown 4600
1.1 You are required to prepare a trial balance at 31st December 2018 and calculate the
Owner’s Capital at 31st December 2018 using the balancing figure
Trial Balance
As on 31st December, 2018
Particulars Amount (£) Amount (£)
Premises 340000
Van 51250
Fixtures 8100
Inventory 63900
P Mullen 1400
F Lane 3100
Cash At Bank 62400
Cash in Hand 5600
S. Hood 2150
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J. Brown 4600
Capital 529000
535750 535750
1.2 Continuing from information provided in the Trial Balance, you should record the
following business transactions for January 2019
Fixed Assets A/c
Dat
e Particulars
J.F
. Amount (£)
Dat
e Particulars
J.F
. Amount (£)
To Bank A/c 340000
To Bank A/c 51250
To Cash A/c 8100
To Balance
B/d 463250 To Bank A/c 63900
463250 463250
Debtors A/c
Dat
e Particulars
J.F
. Amount (£)
Dat
e Particulars
J.F
. Amount (£)
To Sales A/c 4500
By Balance B/d 4500
4500 4500
Cash in Hand A/c
Dat
e Particulars
J.F
. Amount (£)
Dat
e Particulars
J.F
. Amount (£)
By Opening Balance 5600
To Balance
B/d 5600
5600 5600
Creditors A/c
Dat Particulars J.F Amount (£) Dat Particulars J.F Amount (£)
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e . e .
By Purchase A/c 6750
To Balance
B/d 6750
6750 6750
Capital A/c
Dat
e Particulars
J.F
. Amount (£)
Dat
e Particulars
J.F
. Amount (£)
To Opening Balance 529000
By Balance
B/d 529000
529000 529000
Cash at bank A/c
Dat
e Particulars
J.F
. Amount (£)
Dat
e Particulars
J.F
. Amount (£)
By Opening Balance 62400
To Balance
B/d 62400
62400 62400
Trial Balance
As on 31st December, 2018
Particulars Amount (£) Amount (£)
Fixed Assets A/c 463250
Debtors A/c 4500
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Cash in Hand A/c 5600
Creditors A/c 6750
Capital A/c 529000
Cash at bank A/c 62400
535750 535750
1.3 Apply the trial balance figures and show in which statement of financial accounts they
will end up.
Journal Entries
Date Particulars L.F. Debit (£) Credit (£)
1st January, 2019 Storage A/c … Dr 200
To Bank A/c 200
2nd January, 2019 Purchase A/c …Dr 6080
To S. Hood 1450
To D. Main 2060
To W. Tone 960
To R. Foot 1610
3rd January, 2019 J. Wilson A/c …Dr 1120
T. Cole A/c …Dr 1640
F. Syme A/c … Dr 2080
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J. Allen A/c … Dr 910
P. White A/c … Dr 2420
F. Lane A/c … Dr 770
To Sales A/c 8940
4th January, 2019 Motor Expenses A/c … Dr 470
To Cash A/c 470
7th January, 2019 Drawings A/c … Dr 1500
To Cash A/c 1500
9th January, 2019 T. Cole A/c …Dr 680
J. Fox A/c … Dr 1310
To Sales A/c 1990
11th January, 2019 Purchase return A/c … Dr 680
To J. Wilson 270
To F. Syne 4110
14th January, 2019 Van A/c … Dr 28800
To Abel Motors 28800
16th January, 2019 Bank A/c … Dr 7020
To P. Muller 1400
To F. Lane 3100
To J. Wilson 850
To F. Syme 1670
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19th January, 2019 R. Foot A/c … Dr 50
To Purchase Return 50
22nd January, 2019 Purchase A/c …Dr 3740
To L. Mole A/c 1830
To W. Wright A/c 1910
24th January, 2019 S. Hood A/c … Dr 3600
J. Brown A/c … Dr 4600
R. Foot A/c … Dr 1400
To Bank A/c 9600
27th January, 2019 Salaries A/c … Dr 4800
To Bank A/c 4800
30th January, 2019 Business Rates A/c … Dr 1320
To bank A/c 1320
31st January, 2019 Abel Motors A/c …Dr 20500
To Bank A/c 20500
Conclusion
This part of the report outlines different types of activities that are recorded in the books of
accounts of the business entities. These are very important for the companies to perform as this
gives a very important thing for the companies. The trial balance is performed to check the
arithmetical accuracy of the entries that are being posted in the ledger accounts from the journal
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entries. These helps the companies to post daily financial activities that are required for them to
perform. These also help the companies to record all the financial transactions that are related to
the business of the companies for keeping a record of all the entries.
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Task 2
Prepare final accounts for sole-traders, partnerships and limited companies in accordance
with appropriate principles, conventions and standards
2.1 Describe the financial accounting statements prepared by a business entity. Discuss the
type of information presented through each statement.
The preparation of the final accounts to get the statements of the financial accounting is very
important for the companies. The companies to bring in investments from the public use these.
These are vital for the companies to follow so that the accounts are maintained and proper
utilisation of the financial statements is done. The financial statements are performed on the last
date of the financial year, which is generally for a period of one year. Three statements are
performed to complete the final accounts of the business entities for that period. These are “the
statement of the financial position, the statement of cash flow and the income statement”. These
will be explained below:
“The statement of Profit and Loss”
The “statement of the profit and loss” is the first statement that is being prepared by the business
entities. The “profit or loss” that is incurred by the company is being achieved from this
calculation. This is very important for the companies to perform. This helps them to understand
the different activities that are related to the income and the expenses of the companies. “The
profit or the loss” is achieved by subtracting the expenses from the incomes of the companies.
These help the companies to get the desired result of the “profit and loss statement”. This is also
known as the “Income Statement”.
“The statement of Cash Flow”
This is another important statement that is being prepared by the companies. This helps the
companies to control and check the flow of cash among the company over a given period of
time. This is very important for the companies to perform so that the inflow and the outflow of
teh cash is controlled and the profit is retained by the company to be used for any kind of
research and developmental purposes. These will help the companies to retain their profit in the
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