Financial Accounting Report: Regulations, Conventions, and Statements

This report provides a comprehensive overview of financial accounting, covering fundamental concepts, regulations, and practical applications. It begins with a definition of financial accounting, emphasizing its role in recording, reporting, and presenting financial performance, and highlights the importance of tools like balance sheets, income statements, and journal entries. The report then delves into the regulations governing financial accounting, including International Financial Reporting Standards (IFRS) and the Accounting Standards Board (ASB), outlining their impact on financial reporting and decision-making. It also explores key accounting principles such as the economic entity assumption, monetary unit assumption, full disclosure principles, going concern principle, and revenue recognition principle. The report further examines conventions related to consistency and material disclosure, providing guidelines for accountants. The report includes examples from client cases, demonstrating the preparation of journal entries, trial balances, profit and loss statements, and balance sheets. The report also analyzes the P&L statement of Rain Tree Ltd, demonstrating how to assess the company's profitability and financial health. This report provides a detailed understanding of financial accounting practices and their implications for business operations and decision-making.

FINANCIAL ACCOUNTING

INTRODUCTION
Accounting is the method used by the entities in order to keep the record of financial data
and information by which it able to analyse its performance for take the varies business
decisions. Each and every company has the accounting department where a particular manage is
to be appointed who check the financial transactions in the proper way. In the accounting aspect
there are generally two fields come into consideration which are like as management as well as
the financial for making the internal and external business decisions respectively (Bradshaw and
et.al., 2013). The current report focus on the financial accounting where only the monetary
transactions are to be discussed as well as assessed by the company. Every firm in the entire
business process adopt the financial accounting which helps to the entrepreneur and managers
for measuring their profitability position within the market segment. The scenario provides
explanation for preparing the books of accounts from initial to the final account along with
reducing the errors. It shows about the journal entries, ledger account as well as the trial balance
which are used for determining the financial transactions in fruitful ways. Apart from this,
description regarding to the bank reconciliation statement (BRS) and two accounting principles
such as prudence and consistency also given in the present report. Moreover, it helps to the
reader to known about the depreciation methods as well as suspense and clearing account which
are used by the accounting managers for keeping record of the various financial data occurs
within the company. The report giving description about preparing the accounts of financials step
by step in within the accounting process and assess the position in form of profit and revenue.
A
1) Definition of financial accounting
Financial accounting refers to recording, reporting and presenting organization's financial
performance for transacting goods and services produced by entity. In this regard, different tools
and elements are used to showing off incurred expenses and gained revenue on production and
supplement of products. It includes preparing and maintaining balance sheet, income statement,
profit and loss account and different financial notes as journal, ledger and so on (Bakand, Hayes
and Dechsakulthorn, 2012). Through these system tools, specific transaction involving purchase,
sales, cash, capital are presented by which different ideas are created for operating further
business activities. Including this, revenue, expenses, assets including current and non-current

are obtained for identifying company's economic position that leads to make decisions for further
implementation.
Moreover, systematic records are prepared and maintained as well reports are made to
express monetary performance of organization. Different kinds of financial data and performance
of last years' transactions are presented by which several ratios are calculated and profit earning
potential of organization is obtained. On behalf of this interpretation of different financial tools,
optimum allocation of fund can be gained that affects financial management of organization. For
financial accounting, different people are involved such as stakeholders, bank, employees,
suppliers and business owners and so on (Cheng, Ioannou and Serafeim, 2014). There is an
accounting standard presented under which various rules and provisions are provided for
financial accountancy. In this process, all kinds of transactions for business operations are to be
followed for effectiveness of entity. Moreover, it is analyzed that for preparing financial
statements, several obligations are applied for calculation and recording transaction as per which
further business activities.
2) Regulations regarding financial accounting
There are different kinds of regulations provided for financial accountancy for example;
International Financial reporting council (IFRC) and Accounting standard Board (ASB).
Through these accounting standards, several kinds of rules and obligations are provided to
prepare and maintain financial records. In this regard, accurate economic information are gained
by which decisions are made to operate business activities effectively. Including this, systematic
and ethical transaction of goods and services can be achieved that impacts on company's business
operations and different decisions. It aims to improve standards of financial accounting as well
corporate reporting. Along with this, it provides guidelines to record financial transactions
systematically. Including this, true and fair views are obtained to present actual economic
position of entity. However, accounting requirements are generated for financial accountancy for
which issues can be solved out for adequate accountancy (Midrigan and Xu, 2014). In this
regard, some of the main regulations regarding financial accountancy for UK can be understood
as below:- International Financial Reporting Standards (IFRS):- It is founded and developed by
independent organization to provide structural framework to companies for preparing

financial statements. However, rules and regulations are mentioned through this
accounting standards to present all details of financial transactions including balance
sheet, income statement etc. In addition to this, various guidelines are provided for cost
implementation that influences credit ratings (Battiston and et.al., 2016). Including this,
several accounting regulations for controlling over excess of financial transactions. Thus,
IFRS is effective regulatory to gain financial information for further implementations.
 Accounting Standard Board (ASB):- Through this accounting standard, role and
enforcement of accounting are presented for financial information and provisions.
However, usefulness of ASB can be understood as follows:-
Helpful for formulating accounting standards.
Provides different laws, costumes for recording and presenting financial information.
Different terms and conditions are provided to develop own standard effectively.
Thus, above mentioned accounting standards are useful to provide rules and regulations
regarding financial accountancy provisions. Therefore, various guidelines and instructions are
provided for financial accounting including journal, ledger, balance sheet, profit and loss
accounts' recording (Bartram, Brown and Waller, 2016). In this regard, rules and obligations of
accounting standards presented for preparing and maintaining statements as well showings off
monetary performance of organization. On the basis of which, further strategies can be
implemented to improve accounting standards.
3) Accounting rules and principles
Financial Accounting Standard Board (FASB) provides provision for principles and
guidelines related to recording information and further preparing planning for further business
operations. For preparing financial statements, several principles are obtained for basic
information and to understand generally accepted accounting principles effectively (egal,
Shaliastovich and Yaron, 2015). Therefore, essential accounting rules and principles can be
described as follows:- Economic Entity Assumption:- In respect of legal purposes, it is considered that
proprietorship and its owner are just similar as one entity. While, in accounting
perspectives, both entity and its owner are different for maintaining financial records.

Therefore, it is essential to prepare records for company and its owner's role separately.
There must be financial statement prepared for both efficiently. Monetary unit assumption:- It is provided by accounting standard for presenting costs in
unit. For this result, gains and losses are also related to recording amounts therefore true
and fair amount of financial transactions can be gained for further business operations
(Pasquariello, 2014). Full disclosure principles:- Through this accounting principle, it is required for
accountant to present all details of financial transactions includes gained income and
incurred losses thereby actual business performance can be expressed that is related with
providing all descriptions of information. In this regard, depreciated amount, scrap value,
loss due to different changes are obtained for preparing accounting policies. Going concern principle:- It is considered that company is a going concern that never
dies whether its stakeholders, managers got fluctuated. In accordance to this, it is needed
to prepare and maintain account in the name of company (Subrahmanyam and Titman,
2013). Including this, gained profit, incurred losses are needed to be recorded to
implement plans in future time. Thus, going concern principle presents organization's
performance and reputation to be maintained.
 Revenue recognition principle:- It is necessary for organization to record all kinds of
accurate income in financial statements. For showing off good reputation of entity, do not
present losses is unethical. However, in brief, we can explain this principle with the help
of example as if company incurred 10000 for selling goods and recording this amount as
20000 is illegal as well not fair for business operations. Including this, different issues are
obtained regarding business activities.
4) Conventions and concepts related to consistency and material disclosure
Accounting conventions is a method for providing guidelines for accountant to describing
financial information. Through this method, different concepts are obtained regarding financial
accountancy for disclosing fair amount and value on transaction (Murphy, 2016). However,
conventions in relation to consistency and material disclose can be expressed as below:-

Conventions related to consistency:- Under this convention, it should be obligated to
record all changes in business operations. However, reheat the true and fair business is quite
required for accountancy. As per which, further implementation can be obtained as well financial
transactions can be operated in future time (Nixon, 2015). Therefore, consistency is needed to be
expressed for activities and recording financial transactions effectively.
Conventions regarding material:- According to this convention, it is liability of
accountant to record changes in materials for business operations therefore, proper transaction
and effective can be obtained for recording financial transactions effectively. Sometimes,
accountant records materials as to added it with other resources and records unfair transactions
for business operations (Footman, 2014). In this regard, material used and allocated wrong
recording affects further business operations.
CLIENT 1
A) Prime entry book
The record of the financial data and transaction which are done before comes into
consideration in the system of double entry in order to secure data is identified as prime entry
book in the accounting aspect. There mainly cash book, day to day transaction book and journal
entries made in this and the management go for prepare the further accounts (Bryer, 2013).

1 Preparing journal entries and calculating capital of the business owner
a) Preparing prime entry or journal entries

b) Complete the recording of financials using double entry system
The system under which each and every financial transactions recorded in the books of
account for two times for making the effects on the both sides of financial statements is to be
known as double entry system. When one transaction credit in one side of then same debited in
another side of the statements and reports.

B) Preparation of the trial balance
The account in which both the terms like as capital as well as sales and revenue are to be
recorded with the help of journal entries and ledger account. The next phase which comes into
account after the ledger account is trial balance which is used for make the further statement such
as profit ans loss which helps to determine condition of profit (Alver, Alver and Talpas, 2013).
For the current case scenario the trial balance is prepared and shown as below:

CLIENT 2
A) Prepare the financial statement like P&L
Statement of the financials transactions which helps to the management in order to know
condition of the company that whether it is generating profit or loss from the selling products and
services is called the profit and loss account. Every entrepreneur uses the respective statement to
determine profitability health as well as used as a base for make the balance sheet.

B) Make the statement of financial position
The last and final account made in the accounting process which indicate that financial
health of the company is string or weak in the industry is known as the statement of financial
position or balance sheet (Hahn, Fairchild and Dowis, 2013). Higher the amount remains in such
account is beneficial for the management and shows that it is more efficient in the market.

Statement of Balance sheet for the year ended at 31st December, 2016 of Sole trader Peter
Pipe
CLIENT 3
A) Preparation of P&L account for the firm Raintree limited
P&L account for Rain tree Ltd. For the year ended at 30th September 2016

By considering the P&L statement of the business entity such as Rain Tree Limited it can
be said that it generates amount worth of 107 GBP where expenses are more for producing the
products as well as services. In this case, company generates gross and net profit worth 74 GBP
and 10 GBP respectively. The management not having strategies and methods for controlling on
the indirect expenses due to which the final profit is only 10 GBP behind sales value of 107
GBP. Here the Raintree limited must reduce and control on the indirect types of expenses along
with improving revenue.

B) Preparing B/S statement for the company Raintree limited

B/S for Raintree Limited for the end of accounting period 30th September 2016
On the basis of the balance sheet it has been analysed that the company having total
assets and liabilities is worth of 137000 GBP which is the better as compare to the profit
generation. In the assets side there are fixed assets are higher in the Raintree company as
compare to the current. Further, in the B/S such as liabilities the company having higher
proportion of the shareholder's equity rather than the total liabilities. By this, it has been clearly
identified that management having the profitability and liquidity position weak which lead to
raise the capital more from the shares in the stock market.

C) Explaining accounting principles considered in ordert to frame financial accounts like
prudence and consistency
Accounting supports to the company for making and preparing the financial statements
but there are several types of the standards, theories, principles are associated with the
accounting. By taking support of all kinds of the theories, principles and accounting standards
each manager able to prepare the statements in the adequate manner. In the current case there is
regarding to the accounting principles is described where different number of the principles
come into consideration which are used by the firm (Edwards, 2013). Here only two principles of
the accounting are described by which the management able to prepare the statements which are
like as prudence as well as consistency. Description or explanation of both the accounting
principles is given as below:
Prudence Accounting Principle- Principle of the accounting in which methods of treating
financial data are becoming change over the periods of fiscal years is known as prudence
accounting. It is defined and considered with the another name as well which is like
conservatism principle of accounting. The data which are realized in the company are to be
recorded on the immediate basis but in opposite to this some transactions record as they occur in
the company. This accounting principle is used by the business entity to combat those financial
problems which incurred in the firm suddenly and hamper the financial position. Because of this
particular reason it is adopted in the contingency for resolve the errors and issues comes into
consideration suddenly (Blankespoor and et.al., 2013). In the prudence concept there accounting
treatment of the reserve amount is to be recorded which helps to at least recover the bad debt
amount in the entity. Due to higher amount of bad debts various kinds of expenses enhance at the
workplace which lead to decline business performance in the industry. Along with this, overall
functioning of the company also highly affected as level of bad debts increase consistently within
working environment.
For example: if the firm going to record of the revenue then company analyse that in the
actual manner it is generated or not and then make treatment in the books of profit and loss
account. Apart from this, when there liabilities as well as expenses are going to record then
without making justification and analysis the management record in the statements at that
immediate time.

Consistency Accounting Principle – Other accounting principle is such as consistency and by
the name it has been clearly identified that it talking about the same process on the continuous
basis. In this, when one kind of method for making the specific accounting treatments needs to
follow for every year up to the closing of the firm for prepare accounts and statements of the
accounting. Through this the company is helpful because there are no need to read and
understand about the new concepts and methods of accounting for making treatments. Most of
the businesses adopt this principle due to its easy way and simplicity as well as no need to search
on the new types of the principles. As per the consistency accounting principle when the
company use one kind of the methods and accounting standards then cannot make changes in all
the next years (Horngren and et.al., 2012). On the continuous basis necessary to follow same
theories, methods and standards by the manager which sometimes affects in negative way. In
opposite to this, if the accounting principle or method changes or updated and come up with the
new version and features then can changes the method of accounting treatment in the further
years.
For example: To analyse the value of inventory in the company, management uses
(FIFO) technique and adopts the consistency principle of accounting. Then in this situation for
all the future years the respective manage must use only FIFO tool in order to do inventory
valuation.
D) Describing two ways of depreciation like WDM and SLM
Along with the accounting principles there are depreciation is also one kind of the
important aspect comes into accounting aspects of financials. The residual amount associated
with the asset over the period of fiscal years is considered as the depreciation in the accounting
process. It is one type of the expenses which comes under the fixed or indirect and deducted
from the gross profit generated by company which lead to directly impact on final profit. While
making the calculation of depreciation expense there are mainly three concepts are to be taken
account as the base which are like as cost, estimated life and salvage value of asset. Such kind of
cost is to be incurred and charge on the fixed assets of the company which are like as plant,
property, production equipment, machinery etc (Lovell and et.al., 2013). When the firm is going
to compute depreciation then there several methods are used and among them two methods are
explained here which are such as follows:

Straight Line Method- The tool of depreciation in which amount of the depreciation remain
constant over the each and every financial year is known as SLM. Along with this, same figure
are to be carried forward in accounts of financials of the further period which helps to the entity
to take judgements because such expenses not changes. As per this particular method, if total
depreciation money is worth of 6000 GBP at the end of first year then it will be carried out in
next year as well. Moreover, till the end of estimated life the particular asset, same amount of
depreciation is used in the expense of P&l accounts. The formula under which generally three
elements are considered which are such as scrape value, estimated life and cost of purchasing.
Further, formula of the SLM is given as below:
Depreciation: Initial cost of asset – scrape value / useful life of the asset
For example: if there are expenses of one equipment along with terminal value is worth
of 25000 and 5000 GBP respectively. Further, estimated life of the equipment is 5 years then
amount of depreciation as per SLM will be:
Depreciation = 25000 – 5000 = 20000 / 5 = 4000 GBP.
Written Down Method- Another depreciation technique is WDM where the respective cost as
well as the money of depreciable both declines in each accounting period by which profit
increases. According to this method, money of total depreciation reduces over the each
accounting year till the end of asset's estimated life. Under this, amount of depreciation is
charged on the basis of percentage rather than value. As the fiscal year passes the value of
depreciable amount reduce (Watrin, Pott and Ullmann, 2012). In the corporation world, there are
some companies use the written down method but as compare to SLM less used. It is little
typical and new calculation require in the each year.
For example: if an organisation purchase an asset and cost of it is 30000 GBP and
charges of depreciation are 10% where in the first year amount of depreciation will be 30000 *
10% = 3000. In the next year money of depreciation will be 30000 – 3000 = 27000 GBP where it
will 27000 * 10% = 2700 GBP. Up to the end of life of the equipment same process will use to
derive the depreciation amount.

CLIENT 4
A) Defining the statement of bank reconciliation statement (BRS) with its objectives
In the business apart from the P&L or B/S, there is BRS is also prepared by the
management which stands for the bank reconciliation statement where the company able to
determine that between bank balance as well as the cash balance on particular date how much is
there. In this, two things are to be analysed along with the detecting financial errors which are
such as bank statement and the cash book of company. It is one kind of the significant method of
bookkeeping which comes under the accounting process and helps to the management for take
various types of the business decisions in proper manner. Main and key purpose or objective to
make behind the BRS is for detect and identify those problems and constraints which are
occurred while preparing the cash book (Bank Reconciliation, 2013). Apart from this, those
items and financial transactions which are not recorded in cash book due to some reasons are
also identified by the BRS which lead to support accounting manager to assess bank balance up
to the greater level. Another objective of bank reconciliation statement is that to outline or
provide information about the deposits, withdrawals as well as other kind of banking activities
and transactions which affects to the bank account of the company within particular period of
time.
B) Analysing reasons due to which bank records differ from cash book
Bank records are related to presenting financial transactions of money between customers
and institution. It provides different financial tools operations such as cheque book, cash book,
pass book and so on. However, these are considered as contract proof for transaction between
both parties for depositing and withdrawal of money. Including this, bank records are interrelated
with showing off different agreements for its services that are recorded in books. In this process,
various transactions are recorded and as per critical evaluation, it is analysed that some variances
occur for transacting fund and taking advantages of bank services. In this regard, if employee of
the institution credited amount to customers' account as per demand but it does not posted and
verified by supervisor, it processes loss for worker of the bank. Moreover, for cross checking,
differences occur between cash book and bank records is a reason for differences between them.
Along with this, in cash book, only transactions are printed not charges on interest, surcharges
and charge on different services do not included in cash book. It creates difference between both
entries and printing for recording transactions are presented that emerges issues related to

transaction of money. Including this, error in computer system and timing difference for cash
book and bank records are obtains issues that affects banking services and customer
dissatisfaction towards banking services. Thus, issues are occurred between bank records and
cash book that required to be focused and preparing strategies for better quality services.
However, it is needed to following on some specific rules and regulations regarding banking
systems and entering in cash book for transaction.
C)
BRS for 1st December 2016
Frame the updated cash book

BRS as 21st December
CLIENT 5
A) Balance books of Henderson for May 2016
Prepare sales ledger control account
Purchase ledger control account

B) Control account and its requirements
Control account refers to within GL (general account) that increased balances in
subsidiary accounts. An general account can keep hold hundreds of accounts and sub- accounts.
Its trying to include all of these in the general ledger can make it unworkable, so a control
account is utilized.
Check on the accuracy:-This account provide as an accuracy and effectiveness of
written record made in the individuals accounts in the purchase and sales ledger. It is very easy
to make a problems in posting entries, because there might be hundreds of entries to make.
Figures might get transposed. Some entries might be omitted altogether, so that an invoice or a
payment transaction does not appear in a personal account as it should. The total balance on the
debtors account with the total of individual balances on the personal accounts in the sales ledger.
The total balance on the creditors account with the total of individual balances on the personal
accounts in the purchase ledger. It is possible to identify the fact that errors have made.
For internal check:-Where there is a separate of clerical bookkeeping duties, the control
account provides an internal check. The person posting entries to the accounts will act as check
on a different person whose job it is to post entries to the sales and purchase ledger accounts.
More simply and quickly:- To provide debtors and creditors balances more quickly for

producing a trial balance or balance sheet. A single balance on a control account is obviously
expected simpler and quickly than many individual balances in the sales or purchase ledger.
This means also that the number of accounts in the double entry bookkeeping system can be kept
down to a manageable size, since the personal accounts are memorandum accounts only and the
control accounts instead provide the accounts required for a double entry system.
CLIENT 6
A) Suspense account and its key features
Suspense account:- It is temporary account used for solving out issue occur for entering
financial transactions of organization. In accordance to this, accurate income and expense
account can be prepared for balancing incurred expenditures and gained income thereby further
business operations can be implemented effectively. For this purpose, doubtful transactions are
recorded as suspense or resolution account that is useful to clarify the issue (Delis, Hasan and
Tsionas, 2014). After getting confirmation regarding actual financial transaction, it got
transferred to income-expense account for presenting financial performance of entity. It analyses
problems occur for exchanging fund related to business activities. However, hidden uncertainties
are emerged through this accounting system that leads to maintain financial records more
efficiently. It is “zeroed out” account that means any recorded amount will be transferred to final
account as of zero cost. Therefore, temporary basis recording is write down in suspense account
to evaluate risks for financial transactions.
Characteristics of suspense account:- There are several key features of suspense account
is presented, some of them can be understood as below:-
 Useful to record specific amount on temporary basis.
 Valuable to carry out amount of errors that are necessary to be rectified.
 Considers as key tool to checking out errors and preparing final financial statement
related to balancing between income and expenditure of the goods produced by
organization (Embrechts, Klüppelberg and Mikosch, 2013).

B) Trial balance with the help of control account
C)
D) Suspense vs. clearing account
Clearing or Suspense account are temporary basis recorded in the financial statements of
the organization. This accounts are the centralization due to any loses for the intention to prevent
form losses that are hold to entering in results orientation financial account. However, clearing
accounts or financial transacting are putting on holding for compile in financial statement. In this
regard, suspense account tracks problems obtain in business operations for gaining financial
information (Brealey and et.al., 2012). While, clearing account determines ongoing transactions
and records financial information as for waiting or at hold. However, after getting confirmation
related to both accounts, are transferred to expenditure and income accounts that effected the

financial performance of business entity. In this regard, comparison between suspense and
clearing account can be expressed in tabular form as:-
Bases Clearing account Suspense account
Recording financial
transactions
Appropriate for waiting
settlements
Suitable for indicate balancing
transaction in resolution
Usefulness Helpful for determining
ongoing transactions
Useful to evaluate problems
occur for financial transactions
Time periodicity Happens for a specific time
period.
For resolving problems
Thus, above mentioned comparison between suspense and clearing account is different
with each other. However, the clearing account keep holds doubtful accounts in isolated formats
as well suspense account clearly doubts transacting (Tatom, 2014). After clarifying total
accounts, clear and fair accounts are transfers to final financial accounts of expenditure and
income for viewing financial conditions of the company adequately
CONCLUSION
This report is concluded that financial accounting is essential to analyse economic
position of organization thereby business operations can be implemented in future time.
However, significance of financial accounting including regulations and consistency are
described for recording information. Including this, prime record book and double entry system
for evaluating journal and ledger are presented through this assignment to identify accountancy.
In this regard, different financial statement such as profit and loss account, balance sheet, trail
balance are structured to present monetary performance of retrainee Ltd. Along with this, various
depreciation methods including straight line and written down are presented for determining
actual profit and cost incurred on business operations. However, bank reconciliation statement
and its usefulness is described that affects financial position of institution. Moreover, causes
behind difference among bank records and cheque book is obtained. Apart from this, comparison
between suspense and clearing account is comprised through this report that affects financial
statement of organization.