Financial Accounting Project 1: Financial Reporting Analysis

This financial accounting project provides a comprehensive overview of key financial accounting concepts and practices. The project begins with an introduction to the importance of finance in an organization, emphasizing the allocation of assets and the time value of money. The core of the project is divided into four parts: double-entry bookkeeping, the formulation of a trial balance, the preparation of financial statements, and the preparation of financial statements for both sole traders and limited companies. The first part explains the double-entry bookkeeping system, detailing the debit and credit norms and the recording of sales and purchase transactions in a general ledger. The second part discusses the formulation of a trial balance, highlighting its importance for recording financial statements. The third part focuses on the preparation of financial statements, including profit and loss statements and balance sheets, and their role in decision-making. The final part compares the financial statement preparation for sole traders and limited companies. The project concludes with a summary and references to relevant accounting literature.

Financial accounting
Project 1

Table of Contents
INTRODUCTION...........................................................................................................................1
PROJECT 1......................................................................................................................................1
P1: Double entry bookkeeping system...................................................................................1
P2: Formulation of trail balance.............................................................................................6
P3: Preparation of financial statements..................................................................................7
P4: Preparation of financial statements for sole trader and limited companies.....................8
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Finance is one of the vital aspects for an organisation. It is the primary motive of
accountant and manager is to make collection of various amount of capital from various sources.
Finance is one of the reliable field that is associated with proper allocation of total asset and debt
obligation that are taken into account in coming future planning. It is a key point or area that is
related with time value of money that state buying ability of an individual units of total currency
during an accounting period of time. This project report is providing valuable information about
various stages of financial analysis. The one is related with the recording of transaction by the
help of using double accounting systems. Another is related with use of accounting techniques in
order to deal with financial issues (Edwards, 2013).
PROJECT 1
P1: Double entry bookkeeping system
It has been determining that most of the time managers are looking to make use of various
accounting tools and techniques which will be helpful in recording of necessary transaction.
Double entry system of accounting means that every financial transaction would include two
separate account. The debit and credit norms while double account keeping should be stated in
various ways. For every accounting transaction, the total amount recorded on left side of the
statement which must be common or equal to total value recorded into other side of the record. It
is based on overall fact that all financial transaction which would be equal and having opposite
effects in two areas of account. This will be used to satisfy below mentioned equation.
Assets= Liabilities + Equity
Recording of sales and purchase transaction into a general ledger:
It has been found that the general ledger consists of medium and small company’s
business statements and every financial transaction would affect those accounts. Business
recording transfer to general ledger which is being recorded in the form of journal entries. All the
entries must be recorded into the business and have both increase or decrease effects on the
overall position of assets and liabilities as well as equity statements of the company. it is vital to
initial make evaluation of all records before posting into various statements (Weil, Schipper and
Francis, 2013). A journal which is happens to be real book of entry is the first step in accounting
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process which will be taken into account while record of financial transactions. Some of the
effective journal entries as on 1 June, 2016 recorded underneath:
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P2: Formulation of trail balance
It has been found that every small or large organisation need to prepare financial
statements in order to record various financial statements to determine current position of the
company. there are various types of statements is being prepared such as journal ledger which is
known as initial stage of reporting, ledger posting and trail balance is another specific report that
will provide maximum benefits in near future time.
Trail Balance
Particulars
Debit
amount
Credit
Amount
Cash in hand 11070
Cash at bank 60675
Net Capital 65000
Purchases expenses 18000
Bills payable 14000
Bills receivable 12000
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Sales expenses 26000
Equipment account 3000
Prepaid Insurance account expenditure 75
Prepaid Rent expenses 150
Stationary account expenses 30
Total 105000 105000
P3: Preparation of financial statements
It is essential for the cited company to make proper evaluation of all necessary financial
record of the company so that more reliable outcomes can be incurred during the period of time.
The best part of making reliable decision making in near future time is the role of accountant in
preparing estimated budgeted by taking into account of various necessary records. It seems to
provide necessary idea about profitability and overall position of the company to their
management and other concern parties (Beatty and Liao, 2014). All the business transaction is
initial recorded into journal, ledger, trail balance and other financial statements. On the basis of
all the mentioned various statements, investors used to make reliable decision making for their
upcoming projects.
Profit and loss statement for the year ended 31st December, 2017
Particular Amount
Revenue 125000
less: sales returns 1500
Total Revenue 123500
Less: Cost of goods sold 83500
Discount received 1000
Rent received in advance 4850
Gross profit 45850
Expenses:
Rent & rates expenditure 1500
Telephone expenses 900
Insurance expenses 7500
Bad debts 1200
Depreciation 5000
Wages and salaries 13200
Provision for bad-debts (934)
Less: Bad debts written off (650) 284
Outstanding expenditure 340
Net profit 15926
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Balance sheet as at 31st December, 2017
Liabilities Amount Assets Amount
Capital 120800 Bank balance 10594
Less: Drawings 5150 115650 Cash in hand 340
Creditors 3900 Debtors 12500
Rent received 490 Motor expenses 25000
Reserves balance 15926 less: Depreciation 5400 19600
Suspense account 7489 Prepaid insurance 411
Loan provided 100000
143455 143445
P4: Preparation of financial statements for sole trader and limited companies
Profit and loss statement for the sole trader Ebay
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Balance sheet of sole trader of Ebay
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