Financial Accounting: Journal Entries, Ledgers, and Final Accounts

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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
“Financial Accounting” stands for that branch of accounting, which helps the business entities
to keep a record of the financial transactions of the company. These are very vital for the
companies as the record of the financial transaction in the “books of accounts” are very
important. The accounting of finance consists of three main things that are the “statement of the
financial position, income statement and statement of cash flow”. These are the main pillars of
the financial accounting that are in use. The financial accounting that is in use is through the
process of the double entry book keeping. This suggests that the accounts that are affected in the
books, the ledger is to be posted on all the ledger accounts. This is very vital for the companies
and business entities to perform.
The project will outline different types of things that affect in the working of the financial
accounting. The project will consist of the journal entries, followed by the ledger accounts,
followed by the trial balance. This will also consist of “the statement of the financial position,
income statement and as well as the statement of the cash flow”. Along with these, the project
will also consist of the bank reconciliation statement that is important for the organisations to
perform to check the accuracy in the accounts.
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Task 1
Record business transactions using double entry book-keeping, and be able to extract a
trial balance
Introduction
The report will outline the trial balance and along with it the journals and ledgers of the company
will be provided in the report. These are very important for the company to perform the items in
the form of the double entry book keeping. The report will consist of the calculations that will
provide information about the owner’s capital. These are very important for the company to
perform to record all the transactions of the business so that the things are clear for the company
(Henderson et al., 2015). The owner’s capital is to be calculated from the balance that is
provided by the company. These help the company to work properly so that the income and the
expenses that are incurred by the company are recorded on the daily basis.
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
J. Brown 4600
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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
e Particulars
J.F
. Amount (£)
Dat
e Particulars
J.F
. Amount (£)
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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
Cash in Hand A/c 5600
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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
J. Allen A/c … Dr 910
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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
19th January, 2019 R. Foot A/c … Dr 50
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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
The project consists of the different types of the financial activities that are necessary for the
company to perform. This helps the company to record the daily financial activities to keep a
record of the activities (Horak and Boksova, 2018). It is seen that from the balance that is
provided the trial balance is created to find out the owner’s share of capital, then the ledger
accounts are created with the additional information that were created. After the ledger was
posted, a new trial balance was created with the help of the new balances that were present in the
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ledger. Finally, a set of journal entries are created to close the accounts and the entries are
adjusted.
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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.
There are three types of statements that are prepared by the companies and business entities done
to record the financial positions of the company. These are vital for the company to perform as
the final accounts help the company to present its financial position. The three different
statements of finance that are prepared by the companies are as follows:
“Statement of Profit and Loss”
This is the first statement that is prepared by the companies. This is done to get the “profit or
loss” of the company for a phase of generally one year (Warren and Jones, 2018). This is the first
thing that is prepared by the companies. The statement of “profit and loss” is done to find out
the “profit or loss” that is incurred by the company for the given period of time (Macve, 2015).
The expenses are subtracted from the incomes to get the profits.
“Statement of Cash flow”
“The cash flow statement” is another vital thing that is performed by the companies. This
statement helps the companies to check the inflow and the outflow of the cash in the daily
activities that are present in the company (Buchanan and Davis, 2018). These are very important
to perform as this process helps the company to control the flow of cash so that there are no
problems found in the cash flow statement (Kimmel et al., 2016). There should always be a
control over the cash flow statement so that the company does not go out of cash at any instance.
“Statement of Financial Position”
“The statement of Financial Position” is also called by the name of “balance sheet”. The
companies create this final thing at the last day of the financial year (Maskell et al., 2016). This
is very much important for the companies to perform to show the position of finance of the
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