HNBS 310 Financial Accounting Report: Transactions and Statements

This financial accounting report, prepared for HNBS 310, delves into various aspects of financial accounting. It begins by defining and categorizing different types of business transactions, including cash and credit transactions, as well as internal and external transactions. The report then provides journal entries and ledger accounts, culminating in a trial balance. A key section differentiates between financial statements and financial reports, outlining their content, governance, scope, and users. The report also examines fundamental accounting principles such as accrual, going concern, consistency, conservatism, cost, and economic entity principles. Furthermore, the report presents calculations, journal entries, and ledger accounts, as well as the preparation of profit and loss accounts and cash flow statements. The second scenario focuses on bank reconciliations, control accounts, and suspense accounts. It includes practical exercises such as preparing updated cash books, bank reconciliation statements, and journal entries, providing a comprehensive overview of financial accounting practices.

Financial Accounting

Contents
INTRODUCTION...........................................................................................................................................3
QUESTION 1.................................................................................................................................................3
Different types of business transaction...................................................................................................3
QUESTION 2.................................................................................................................................................5
Calculation...............................................................................................................................................5
QUESTION 3...............................................................................................................................................10
Different between financial statement and financial report.................................................................10
QUESTION 4...............................................................................................................................................13
Principles of accounting.........................................................................................................................13
QUESTION 5...............................................................................................................................................14
Calculation.............................................................................................................................................14
QUESTION 6...............................................................................................................................................16
Profit and Loss Account.........................................................................................................................16
QUESTION 7...............................................................................................................................................17
Cash flow statement..............................................................................................................................17
SCENARIO 2...............................................................................................................................................19
QUESTION 1...............................................................................................................................................19
Bank Reconciliation...............................................................................................................................19
QUESTION 2...............................................................................................................................................20
Control accounts....................................................................................................................................20
QUESTION 3...............................................................................................................................................20
Suspense Account..................................................................................................................................20
QUESTION 4...............................................................................................................................................21
(a) Required to prepare updated cash book and bank reconciliation statement..................................21
QUESTION 5...............................................................................................................................................23
Journal entries.......................................................................................................................................23
REFERENCES..............................................................................................................................................25

INTRODUCTION
Financial accounting is the branch of bookkeeping that aims to deliver relevant data to
external consumers. In many other respects, financial accounting is a method of reporting
company activities and financial data with outside parties such as suppliers, lenders, and other
stakeholders. Financial Accounting is the classification, analysis, summarization, and reporting
of business dealings such as acquisitions, sells, receivable, and current liabilities, as well as the
preparation of financial statements such as financial statements, cash flows, and working capital.
Accounting is the method of ensuring adequate records and compiling a statement of financial
activities (saad jebur AL-Mashhadi and Al-Fadhel, 2020). Financial analysis is the process of
producing and displaying this material in papers for use by the general public outside of the firm.
Financial accounting differs from accounting systems in that it is designed to collect guidance to
others outside the company. Budgetary control, on the other hand, is intended to assist
companies in determining choices inside the business.
QUESTION 1
Different types of business transaction
A business transaction is a monetary event that is documented in a company's books of
accounts via the accounting system. Although not all company transactions are occurrences, each
business arrangement is one. Even when an event contains the specific traits, it should be
considered a trade. A business transaction is an accountancy word that refers to activities taking
place with private entities, such as buyers, contractors, and others, that have money worth and
physical commercial importance to the industry's market, and also having a significant impact
mostly on financial situation. Budget management are documented to guarantee transparency,
generate previous corporate data collected, and give guidance to stakeholders in analysis to
define business model. A transaction initiated by a company that starts the financial statement for
that organization.
There are basically two types of business transactions that are mentioned below:
Cash and credit transaction: A cash transaction differs from other forms of transaction,
including such merchant accounts in a firm with receivable accounts. A cash deal differs from a
card transaction in the same way. Bank deposits are distinct from those that require a customers

to wait of commodities or in the purchase of the items. Credit sales, advance contracts,
government bonds, as well as other balance trades are examples of such agreements.
The usage of a credit card is not required for a credit transaction. It's how a cardholder
can convert a cash transaction to a credit transaction. The payment is still considered as a
monetary sale by the retailer. Clients at many establishments do not have access to ‘trade credit.'
They want thorough assessment prepayment or by debit or credit card. If the company does
provide payment terms, each client will be assessed and a line of credit will be established. In
other respects, how often a consumer may purchase on credit without agreeing to spend (Cai,
2021) (Qasim and et.al, 2020).
Internal and external transaction: An internal transaction is a form of investment process that
happens inside one corporation and has the potential to change the income statement. In these
other respects, it's a transfer of information from one division to the other inside the same
organisation that affects the balance sheet.
An external transaction is a financial trade that alters the accounting equation among two
people. In other terms, an external exchange happens when an account is moved among two
businesses or corporations. It is not an exterior trade when a firm transmits a commodity from
one division to someone within the organisation.
Define single entry book keeping:
A single-entry bookkeeping system, as opposed to the far more common dual bookkeeping
system, registers all accounting information with only one update to the financial statements. The
financial report is the focal point of a single-entry accounting system, which focuses on the
current performance. Cash outflows and payroll records are the most important data to manage
using this technique.
Define double entry book keeping:
Double-entry bookkeeping is an equity account in which every input as one accounts must
always be matched by an equivalent transaction in that other accounts. It lets a company to keep
record of all of its operations and evaluate how it is doing in relation to its total assets, cash flow,
and development. It also covers all of a company's continuous accounting and filing needs VAT

reports, yearly statements, financial records, and so forth all depend for dual accountancy
(Abdusalomova, 2020).
Explain trial balance and its importance
"A list or summary of the amounts or total debits and total credits of the entities in a notebook,
the goal is really to evaluate the equalization of recorded debit and credit balances and to
produce a basin includes for financial information," according to the definition. It will be
standard operating procedure on a specific day because this is only a listing of accounts. It's also
important to note that the accounting equation is not a component of the accounting books, but
rather a report generated by subtracting the balances of reports formed in the accounting records.
QUESTION 2
Calculation
Journal entries
Date Particulars CR DR
01/06/16 Cash a/c DR
To capital a/c
65000
65000
02/06/16 Purchase a/c DR
To accounts payable a/c
8000
8000
07/06/2016 Cash a/c DR
To sales a/c
4000
4000
08/06/16 Accounts payable a/c DR
To bank a/c
4000
4000
14/06/2016 Insurance expense a/c DR
To bank a/c
75
75
15/06/16 Accounts receivable a/c DR
To sales a/c
12000
12000

16/06/16 Purchase a/c DR
To accounts payable a/c
10000
10000
18/06/16 Computer equipment a/c DR
To cash a/c
3000
3000
20/06/16 Rent a/c DR
To bank a/c
150
150
21/06/16 Cash a/c DR
To sales a/c
10000
10000
25/06/16 Cash in hand
To bank a/c
100
100
30/06/16 Stationary a/c DR
To cash in hand a/c
30
30
Ledger accounts

Trial Balance

QUESTION 3
Different between financial statement and financial report
Origin of variance Financial report Financial statement
Content This addresses all community
economic concerns.
This considers all of the other tasks
as knowledge that the supervisor
must rectify.
Governance The IASB administers that this
whole insolvency good
documentation. The International
Accounting Standards Board is in
responsible of the others.
The IASB manages the filing of
expenditures records in this area.
Scope All wide finance records are
compared to the attached invoice
Using financial reports, the degree
of meaningful accounting

at this phase. It will be accepted on
following reasons: first, all extra
cash interactions are in so many,
and second, many budgetary
programs of the sector, including
all financial statements and other
cost analyses, are similar reports.
information seem to be quite low.
Despite matter how well-
documented duty-free commerce is.
Examples A variety of situations, such as
bank records, accountant’s
allowances, unpleasant guarantee
studies, assurance value findings,
and so forth, may occur in the
form of balance sheets.
There were no seconds of minutes
in actuality. In any case, there are
four different sorts of disclosures,
such as clearance declaration,
economic reporting, income
transparency, and shareholder price
transparency.
Requirement Businesses regulators want such
documents since they reveal
details on their consumption and
associated acquisitions, at the very
lowest in order to build a solid
cash contractual for a particular
season. Because it includes all of
the information connected to the
connection, such summaries are
used more generally than some
others. Likewise, comparable
metrics have been utilized in
conjunction with compartments in
the creation of the economic
system, allowing them to earn
from most effects by incorporating
Cash summaries are used in
conjunction with each other and for
specific applications only. The
review's advocates thoroughly study
them in order to determine the
financial foundation of the
activities, the state, the
appropriateness of monetary
backing, and the business's business
strategy. Additionally, outsider
analysts frequently utilise those
ratios to determine if the link's
finance characteristics are positive
or negative.

a decrease for full usage.
Users Increasing numbers of customers
are commonly utilized in reports
verifying upper management
agencies, board members, and
other clients of the authority's cost
ratios, in the very same manner as
-reports connected to the
structure's stability are (Radianto,
Kristama and Salim, 2021).
Loans, sellers, creditors, renters,
delivery drivers, unrestricted
industry experts, accounting
statements, and others are all
consumers of banking meltdown.
Different types of users
The accounting information of a company is of interest to a number of people. Various clients
make judgments based on the organization's financial data and are impacted by the organization's
actions. Balance sheets, ledger of accounting, and papers are all examples of accounting data.
The parties can be split into two groups.
1. Internal: These are all the people that manage the company on behalf of the investors.
They must guarantee that the company is successful, develops, and thrives, as well as that
the shareholders receive a dividends or return on investment. They are responsible for
monitoring the organization's operations and providing that the assets of the investors are
effectively handled and invested. Administrators must also keep track of expenses and
ensure that appropriate pricing are determined. They are also responsible for the
organization's strategy formulation. They'll need fiscal account balances for all of this.
2. External: Those who have previously made a financial investment in a company or
institution. They require financial reports from the interest of investors in order to
determine if their money are effectively managed, growing, and will provide a payout or
returns. They know the financial position of the organisation and determine if resources
are being used effectively via the accountants they select (Wang, 2020).

QUESTION 4
Principles of accounting
There are mentioned different types of principles of accounting which is used by the
different types of an entity such as:
Accrual principle: The accrual principle stipulates that activities should be recognized in
the process of system development, which is really the underpinning for accrual based
bookkeeping. This approach runs counter to the notion that activities should be documented in
the time wherein the cash flows as a function of flow rate. The accrual principle is demonstrated
by documenting revenues whenever a client is billed rather than when the client purchased.
Going concern principle: The going concern concept assumes that a company will
continue to operate for the foreseeable future. Although this idea may appear straightforward, it
ensures accounting records users that a firm will not close its doors or liquidate its assets in the
near future. As a result, an auditor may be warranted in deferring the recognition of some costs
until the firm is now in operation (Negash and Lemma, 2020).
Consistency principle: The consistency principle states that accountant should use the
same accounting technique across activities or above period. When a company utilizes diverse
accounting procedures and practices, the reporting might become skewed, making repeated
results difficult to evaluate.
Conservatism principle: Whenever it comes to reporting a thing, the conservative
principle of bookkeeping aids professionals in distinguishing between two apparently equal
choices. In practice, the conservative principle indicates that, offered a choice of operations with
identically potential results, an auditor should recognize the contract producing in the greatest
level of income profit. The notion that revenues and property should be recorded only while they
are certain of having delivered is now at the heart of the conservative concept.
Cost principle: The cost principle states that a company's assets, obligations, and fair
value should be recorded at their actual acquisition costs instead of their total valuation. This
idea, nevertheless, is not commonly employed. Accounting scandals changes have made it
fashionable to report these things at their market value rather than their purchase price costs.

Economic entity principle: According to the business entity concept, a corporation's
operations should be maintained distinct from that of its founder, directors, and stakeholders.
Underneath this concept, all operations must be attributed to a single commercial entity and it
can be combined with other businesses.
Full disclosure principle: The full disclosure concept requires firms to provide all financial
data to all persons who may be interested in reading it. This approach guarantees that all
consumers of a large number of transactions aren't deceived or denied access to the information
(Al-Nasrawi and Thabit, 2020).
QUESTION 5
Calculation
Profit and loss a/c
Particulars Amoun
t
Particulars amoun
t
Opening stock 9,500 Sales – 125,000
Purchase – 75000 Less: Return - 1000 124,00
0
Less: Return – 1500 73,500 Closing stock 1,000
Wages and salaries 13,200
Gross profit 28,800
125,000 125,00
0
Rent and rates – 1500 Gross profit 28,800
Add: Outstanding rates –
340
1,160 Interest received 1,000

Postage 900 Rent received - 4850
Insurance – 7500 Less: Advance rent –
490
4,360
Less: Prepaid insurance –
411
7,089
Bad debt write off 650
Net profit 24361
34,160 34,160
Balance sheet
Liabilities amount Assets Amount
Capital – 120,800 Bank 10,594
Less: Drawings – 5,150 Cash 340
Add: Net profit –
24361
140,011 Prepaid insurance 411
Provision for bad
debts
934 Advance rent 490
Debtor – 12500
Creditor 3,900 Less: Bad debt write off –
934
11,850
Outstanding rates 340 Motor van at WDV – 19600
Less: Dep – 5000 14,600

Loan 100,000
Closing stock 1,000
145,185 145,185
QUESTION 6
Profit and Loss Account
Balance Sheet

QUESTION 7
Cash flow statement
The cash flow statement illustrates the inputs of revenue into a firm and the expenditures of
revenue from a company. Income from and used in operating operations, cash from or used in
investment activities, and money from that are used in financing activities are the 3 types on the
financial statement. Merchandise, machinery, and copyrights are all crucial to a corporate
growth, yet none of them affect the cash flow statement. Although the firm may be meticulous in
producing net revenue from such assets, that isn't the full tale of its real happiness. A cash flow
statement is a financial statement that demonstrates how modifications in the net income or
financial statement influence the availability of cash to a corporation (Petra and Spieler, 2020).
The length of time is determined by how regularly listed companies firms must declare their
results to authorities and customers under regional legislative enactment. That implies every year
on a global scale. It also signifies every quarters in the United States, but it's every 3 months.
Interim reports are only needed every 6 years in many of the remainder of the globe.
 The cash flow statement of a business demonstrates that adjustments in those other
financial accounts impact the availability of cash.
 It converts accumulation net revenue to money net income from the balance sheet.
 It specifies how much money is paid out to shareholders as profits and to managers as
securities remuneration.
 Non-cash activities, including such deficit conversion, are documented in the appendices
of a financial statement.

For example
Cash flow operating activities
Increase (decrease) in accounts receivable 25,000
Increase (decrease) in accounts payable (5,000)
Net cash flow from operating activities 20,000
Cash flow from investing activities
Purchase of land (20,000)
Sale of equipment 5,000
Net cash flow from investing activities (15,000)
Cash flow from financing activities
Dividends paid (3,000)
Increase in bank loans 0
Net cash flow from financing activities (3,000)
Net increase/decrease in cash 2,000
Cash at beginning of period 5,000
Cash at end of period 7,000

SCENARIO 2
QUESTION 1
Bank Reconciliation
Each entrepreneur who establishes a present online bank account is generally issued a Pass-
Book (Bank Account) that details the lender's financial transactions. This Pass-Book will be
created by the bank, whereas the entrepreneur will enter his money transfers in the Real money
with Bank Section. A duplicate of a person's account in the Bank's register is referred to as a
Banks Pass-Book. A client can learn about the information performed by the Bank in his
accounts by looking at the records in the Pass-Book. On a specific day, the Pass-Book and Cash-
Book must both reflect the same bank balance. However, in fact, this is not the case because
some of the entries may have not been entered and might have been written incorrectly in one of
the two books. As a result, the entrepreneur should compare entries in the Pass-Book to
statements in the Cash-Bank Book's column on a regular basis. The "Bank reconciliation
statement" is a report that is generated on a regular basis with the goal of reconciling the two
accounts on a specific date (De Silva Lokuwaduge and De Silva, 2020).
Due to the extreme aforementioned purposes, a Bank Reconciliation Statement is necessary and
important:
A) It identifies errors, inconsistencies, and inaccuracies in either the Pass-Book or the Cash-
Book.
B) It elucidates the reasons for the discrepancy between the bank balance as recorded in the Cash
Book and the bank account as recorded in the Pass Book.
C) It clarifies any delays in cheque collecting.
D) It lowers the risk of different types of fraud by cash-handling employees.
E) There seems to be an ethical checking on the firm's personnel to ensure that the cash records
have always been updated.

QUESTION 2
Control accounts
A control account is a memoranda account into which the different amounts of operations
that have been deducted or credit in particular to an individual’s ledger account are moved in
averages. A Control Accounts are accounts with a value equivalent to the sum of its
underpinning subordinate accounting records. These are entities that appear in the accounting
system and are used to verify that the total in the accounting system matches the sum of its
linked oversight role. It aids in the verification of the sum of all sub ledger accounts and their
corresponding accounts in the Accounting System (Channuntapipat, Samsonova-Taddei and
Turley, 2020).
It aids in the removal of any superfluous data from the Cash Book, which is necessary for
the preparation of financial accounts for a company. For example, if we consider a sales ledger
control account, a firm may have hundreds of millions of creditors, making it impractical to
record their all in the balance sheet. Minimal security is required for control accounts. Directly
posting transactional quantities to a control account should indeed be prohibited, as this may lead
the control account to fall out of equilibrium. Control bank details are not accessible on break
menus on activity types like Approvals or Job Material Purchases when they choose Secured
Income Statement on the Basic Specifications page, so they can be individually input on incident
types.
QUESTION 3
Suspense Account
A suspense account is a temporary account used to correct the discrepancy in the financial
statement caused by a mistake or inaccuracies in the records of an account until the real positions
of the mistakes are determined. In other respects, it's a temporary account where even the
distinction between the two halves of the financial statement is reported until the actual position
of the mistakes is established. A suspense account also is called as an accounting definition or a
discrepancy in books accounts.
Reasons of drafting suspense account:

 Some mistakes may not even be discovered until about the financial year's conclusion.
The settlement agreement will be voided as a consequence.
 The production of the trade and profit and loss statement, and the balance sheet, could be
postponed owing to the financial year's conclusion.
 In such circumstances, a suspense account is set up to modify the balance while the trade,
statement of financial position, and income statement are all continued.
 In practice, any type of inaccuracy is sure to be discovered eventually when using a
double-entry accounting system.
 When a mistake or series of errors is discovered, compensatory journal entries are
transmitted via the suspense account to remedy the problem.
 The suspense account is credited or paid when a journal entry is corrected, as well as
when all previous accrual accounting mistakes are corrected. The floating charge will be
immediately removed from of the balance sheet (Battilana and et.al, 2020).
QUESTION 4
(a) Required to prepare updated cash book and bank reconciliation statement
Updated cash book as at 28th February 2017:
Revised cash Book
Particulars Dr. Particular Cr.
Balance b/d 1760 D.Park 270
Insurance against fire 170 Mr. Akram 105
Monthly bill 56 Bank Collection 325
Arif Paid 186
Bank Charges 25 Balance c/f 1497

2197 2197
Bank reconciliation statement as on 28th February 2017:
Particular Amount
Balance as per Bank 3093
Add:
Bank Charges 25
Arif Paid 186
Monthly bill 56
Fire insurance 170
Less:
D.Park 270
Mr. Akram 105
Bank collection 325
Balance as per cash book 2830
(b) Different terms

Direct debit: Consumers enable businesses or institutions to withdraw payments from their bank
accounts using the Direct Debit programme, which really is a prominent form of payment in the
UK. Bacs (Bankers' Automated Clearing Services), centralized proper investments that conducts
a variety of electronic payments, handles all Direct Debit payouts. Credit card statements, energy
bills, installment payment, rental, regular retainers payouts, and subscribers are all common uses
for Direct Debit. The Direct Debit Assurance is a series of rules that companies undertake when
accepting direct debit orders. Clients are primarily favoured by these policies, which guarantee
that they are not held accountable for erroneous transactions (Dhole and et.al, 2021).
Standing order: A standing order is an instruction given to a banker by a client to pay a specific
sum to some other accounts at frequent intervals. The money is usually paid on a specific day
each month. The money may be deposited into every checking account, and it doesn't have to
correspond to an organisation that has been approved by the payer money institution. Standing
orders are commonly used for regular, operating expenses including healthcare costs, loan
repayments, and membership payments.
Bank charges: The phrase "bank charge" refers to all fees and levies imposed by a bank on its
clients. The word is commonly used to refer to fees pertaining to personal term deposits or card
services. Monthly expenses for the administration of an account, expenses for measuring the
results, interests on loans, prices for surpassing approved borrowing boundaries, or owing money
when no permissible overrun existing are all examples of these charges. The current statement
focuses on individual balance sheet sector in the UK.
Dishonor cheque: A dishonored cheque is one that is not recognized by the banks for a myriad
of purposes, including signatures mismatch, inadequate money in the institutions holding the
cheque, and so on. The bank is unable to cash this check since there is unlimited time in the
accounts to cover it. This showed that the number printed on the check is larger than the total in
the bank (de Azevedo and et.al, 2020).
QUESTION 5
Journal entries

Suspense account

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