Financial Accounting and Reporting: A Comprehensive Analysis

This comprehensive finance report delves into the core principles of financial accounting. It begins by defining financial accounting and its purpose, emphasizing its utility for both internal and external stakeholders, including managers, employees, shareholders, and financial institutions. The report provides practical examples through journal entries and the preparation of financial statements such as profit and loss accounts and statements of financial position. Key accounting concepts like going concern, accrual, consistency, and prudence are explained, along with the purpose and types of depreciation. Furthermore, the report explores bank reconciliations, the reasons for discrepancies between bank and cash statements, and the use of imprest systems in petty cash. It concludes with a discussion on suspense accounts, trial balances, and the correction of journal entries. The report aims to offer a thorough understanding of financial accounting practices and their applications.

Finance

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1- Financial accounting and its purpose......................................................................................1
2- financial statement uses for internal stakeholders and external stakeholders of the company
...financial information is useful for internal stakeholders like managers, employees and owner
of the company............................................................................................................................2
CLIENT 1........................................................................................................................................4
Journal entry in books of account of Alexandra study................................................................4
CLIENT 2......................................................................................................................................13
A profit and loss account..........................................................................................................13
b. Statement of financial position.............................................................................................13
c- Accounting concept of going concern,accrual concept, consistency and prudency............14
d- Purpose of depreciation and its types...................................................................................16
CLIENT 3......................................................................................................................................18
A-Purpose of preparing bank reconciliation reason to perform in monthly basis....................18
B) Reason for difference between bank statement and cash statement....................................18
C- Imprest term in petty cash statement....................................................................................18
D Cash and bank reconciliation statement...............................................................................18
CLIENT 4......................................................................................................................................20
a. preparation of balance accounts...........................................................................................20
CLIENT 5......................................................................................................................................21
A- Meaning of suspense account and its features.....................................................................21
b. Trial balance........................................................................................................................21
c. Journal entries and correction................................................................................................22
CONCLUSION..............................................................................................................................24
REFERENCES..............................................................................................................................25

INTRODUCTION
Finance term refers to necessary money which is required for company for accomplishment of
goals and economic objectives. Finance depict to investment and profitability opportunity of the
company. It helps to take decision for growth of the company and also evaluate financial position
of the company.
Present report includes financial accounting and its purpose which is uses for internal and
external stakeholders of the company. Further it explain about going concern concept , accrual
concept , consistency concept and prudent concept of accounting (Warren and Jones, 2018). This
report will includes depreciation and its type’s further financial statement prepared by sole
traders and limited company. It will includes purpose of bank reconciliation and reasons of
difference between cash statement and bank statement. It will also consist that imprest term
which is used in pretty cash system and suspend account and its features.
1- Financial accounting and its purpose
Financial accounting is the process of accounting which is focus on analysis,
summarising the financial transaction of the company .financial accounting shows financial
strength of the company. Generally accepted accounting principle is standard framework of
preparing the financial accounting (Warren and Jones, 2018). It is useful for internal members as
well as external members so that they can analysis and summarised financial transaction before
investing their funds.
Financial accounting must be clear to understand, relevant and comparable which is helpful to
compare from other companies. In financial accounting company prepare income statement,
balance sheet, cash flow statement and stakeholder’s equity. By analysing these statements
internal members like promoters, employees invest capital and external person like shareholders,
customer, creditors invest their money into the company for maximising the wealth.
Purpose of financial statements
 Financial statement of the company provide financial information or picture of financial
position to their customers and investors that are helpful for invested money into the
company.
 Statement is useful for predict future earning capacity of the company so investors and
customer to make their financial related decision.
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 Financial statement provides cash flow of the company that helps to investors, customers,
creditors and shareholder to know about the liquidity position and flow of the cash
(Buchanan and Davis, M, 2018).
 These statement analysis management effectiveness of the company that is depend upon
profitability.
 Financial accounting records all facts that helps to take effective decision regarding
expansion of business, enhance earning capacity.
 It is provide all financial data to government to take decision regarding the taxes, duties
and prices.
 Through financial statement company can analysis standard budget and actual budget and
take corrective action top remove variance. It is useful for cost reduction and making
strategy for achieve the goals of the company.
 Managers of the company getting all information through financial statement that is helps
to making policies.
 Financial statement provide all necessary information to credit rating agency to determine
the rating of the company. Credit rating helps to investors, shareholders and financial
institution for investment purpose.
2- Financial statement uses for internal stakeholders and external stakeholders of the company
financial information is useful for internal stakeholders like managers, employees and
owner of the company.
 Managers- financial statement provide financial information or records to managers by
using these statement manager able to measure company's performance like leverage ,
cost , sales , revenues , all assets and liability of the company. Managers can compare
own financial statement with competitors company statement so managers make
effective strategy and set benchmark for take operational decision and investment
decision that helps to compete competitors and achieving pre determine goals of the
company. It also helps for manager for measure and management the credit risk because
banks approve loan amount by analysing company financial statements and also helps to
analysis investment opportunities of the company (Trotman and Carson, 2018).
 Employees – financial statement helps to assessing the profitability and ability of the
company. It is useful for employees of the company because it shows profitability and
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debt so that ensure to employees about their job security. By analysing the financial
statements Employees can estimate about their future remuneration and incentives. If
company's financial position is strong that helps to retain employees in the company and
also helps to improve productivity and increase profits.
Financial statements is useful for external stakeholders like shareholders, customers, financial
institution, and investor of the company.
 Shareholders- financial statement represent financial health of the company at a
particular period. It provide information to shareholders for equity investment purpose.
Shareholder of the company can evaluate profitability ratio, debt ratio, liquidity ratio.
They can also evaluate dividend yield before investment in equity that helps to generate
profit and wealth maximisation (Filmer, and et.al., 2019). If company financial statement
positive then shareholder invest more fund that and enhance shareholders value it is also
beneficial for company.
 Financial institution- financial institution like banks and non-banking financial company
analysis financial statement then they decide whether loan granted or not. It provide all
profitability and debt amount if company have sufficient profit and not have any
outstanding debt and have good reputation in market then bank will easily provide loan
that is helps to expand business and generate profit.
 governments- financial statement shows assets and liability of the company by using
financial statement government can easily analysis that whether company appropriate
amount of tax paid or not. Government can easily calculate tax amount and all duties
which company have to pay to government at specific time period if company will not
pay tax amount then it will increase in obligation or debt. High debt impact on investors
and customer of the company (Maynard, 2017).
 Suppliers- with the help of financial statement suppliers can decide that sales on credit
are safe for them or not. Suppliers also analysis the ability to pay compensation amount.
If financial position of the company is positive that will helps to enhance contract
between suppliers and company. Company can provide better services to its customer
and generate profits.
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CLIENT 1
Journal entry in books of account of Alexandra study
Journal entries in the books of Alexandra for January are as follows
Date particulars Debit Credit
1st jan 2019 Storage expense A/c Dr 450
To bank A/c
2nd jan 2019 Purchase A/c Dr 6080
To S. hood A/c 1450
To D main A/c 2060
To W Tone A/c 960
To R foot A/c 1610
3rd jan 2019 J Wilson A/c Dr 1200
T . Cole A/c dr 1650
F. Syme A/c Dr 2100
J . Allen A/c Dr 1020
P. white A/c Dr F. Lane A/c Dr 2520
F. lane A/c Dr 980
To sales A/c 9470
4th jan 2019 Motor Expenses A/c Dr 470
To cash A/c 470
7th jan 2019 Drawing A/c Dr 1500
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To cash A/c 1500
9th jan 2019 T. cole A/c Dr 680
J. Fox A/c Dr 1310
To sales A/c 1990
11th jan 2019 Sales return A/c Dr 680
To J. wilson 270
F.syme 410
16th jan 2019 Cash A/c Dr 7020
To P. Mullen A/c 1400
To F. Lane A/c 3100
To J. Wilson 850
To F. Shyme 1670
19th jan 2019 R. foot A/c Dr 50
To Purchase return A/c 50
22st 2019 Purchase A/c Dr 3740
To L.Mole A/C 1830
To W. Wright 1910
24th jan 2019 S. Hood A/c DR 3600
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J. Brown A/c Dr 4600
R. Foot A/c Dr 1400
To Bank A/c 9600
27th jan 2019 Salary A/c Dr 4800
To bank A/c 4800
30th jan 2019 Business rates A/c Dr 1320
To bank A/c 1320
Purchase ledger
S. hood Capital A/c
date details Amount date Details Amount
24th jan
2019 cash book 3600 1st jan 2019 Balance b/d 12150
Purchase day book 1450
balance c/d 10000
13600 13600
J. Brown
date details Amount date Details Amount
24th jan
2019 cash book 4600 1st jan 2019 Balance b/d 16600
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balance c/d 12000
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8

Books of Primary entry
cash book
9

Nominal Ledgers
10