Financial Accounting Report: Concepts, Statements, and Stakeholders

This report delves into the realm of financial accounting, focusing on its core principles and practical applications within a business context, specifically using Airdri Limited as a case study. It explores the purposes of financial accounting, including the preparation of income statements, cash flow statements, and financial position statements. The report outlines key regulations, principles, and conventions that govern financial reporting, such as ethical and measurement rules, going concern, matching principle, and convention consistency. It further examines the roles of internal and external stakeholders, providing examples of each. The report includes journal entries and discusses areas that can cause organizational records to vary from banker's records. The report provides an understanding of financial accounting and its importance in decision-making.

FINANCIAL
ACCOUTING

Contents
Contents...........................................................................................................................................2
a. BUSINESS REPORT..................................................................................................................3
CLIENT 1........................................................................................................................................7
Client 2...........................................................................................................................................11
c. Accounting concepts..............................................................................................................12
d. Types and purposes of depreciation in formulating financial statements..............................13
CLIENT 3......................................................................................................................................13
(B). Areas which cause the organizational records to vary from banker's record.....................14
(c) Imprest in petty cash book...................................................................................................14
CLIENT 4......................................................................................................................................15
CLIENT 5......................................................................................................................................16
REFERENCES..............................................................................................................................19

INTRODUCTION
Financial accounting is the field of bookkeeping worried about the deprived, examination
and announcing of monetary exchanges relating to a business (Arvidsson, 2011). All enterprises
need to plan fiscal reports for a particular timeframe and money related reports have present
before partners. It is useful for the association to take viable choices seeing speculation just as
extension. Fiscal reports demonstrates the money related position of the company. To more
readily comprehend this idea Airdri Limited has been chosen which bargains in electronic
segments and it has a place with United Kingdom. In this report, there are following subjects are
secured, for example, budgetary bookkeeping and its motivations, examination of inward and
outside partners, trail balance , asset report, last records for sole dealers, bookkeeping ideas
identified with consistency and prudency. Aside from this it also talk about reasons for getting
ready bank compromise articulations and deals and buy control record.
FINANCIAL ACCOUNTING
Financial accounting is a part of accounting which helps in tracking the financial
transactions of any organisation for operating and managing its operations in a systematic
manner. It helps in recording, summarizing and presenting all the transactions to prepare the
financial statements. The purpose of preparing such statement is to provide information related to
the operations, performance and cash flows to the managers for taking effective decisions
(Edwards and et. al., 2013). All the organisations are required to maintain their financial
transactions in effective manner so that information be able to usable for stakeholders and
owners. This report includes book keeping system, ledger posting system and the reconciliation
statements. Accounting rules, principles, consistency and importance of financial accounts are
also defined in this context.

a. BUSINESS REPORT
1. Financial Accounting: Financial accounting is a process recording financial transactions to
provide information related to financial performance and position of the organization. All the
financial statements are prepared by considering the local as well as international standards
prescribed. Such accounting helps in collecting and summarizing financial data for the
preparation of statements, such as, income statement, cash flow statement and financial position
statements. All such statements are described below:
 Income Statement: Income statements also known as profit & loss statements are
prepared to show the profits and losses of an organization over a period. Such
statements are used to display the organizational revenues, selling and administrative
expenses, incomes and expenses, costs, taxes paid, gross profit, net profit in a systematic
and logical manner. With the help of such statements owners, directors and stakeholders
are able to determine the profitability of the organisation.
 Cash flow statement: Cash flow statements are those statements includes transactions
related to the inflows and outflows of an organization during an accounting period. Such
statements provides important information related to the cash requirements and needs
for execution of the functions and operations of business in smooth manner. It reflects
the liquidity position of any organisation.
 Financial position statement: Financial position statements are the written records
which conveys the activities and financial performance of any organization. These
statements are inspected by the government agencies, accountants to ensure accuracy in
the operations. Such statements are also known as balance sheet which includes the
details related to assets and liabilities. These are majorly used to take financial and
investing decisions for current as well as future time period.
Regulations related to financial accounting: There are various rules and regulations which are
mandatory to follow in an organization while preparing financial statements in order to
effectively manage the financial transactions by the management for better execution of financial
operations (Francis and et. al., 2013). In order to present the financial information, various
regulations are formed and these are described as :
 Financial Reporting Council (FRC): FRC has provided various provisions in specific
and descriptive format. FRC Board is responsible for overall governance and setting

strategies along with standards and approval of all codes. Such council helps in
promoting integrity and transparency in the day to day transactions of any organization.
 Financial Accounting Standards Board ( FASB): FASB is a private, standard setting
authority which provides principles, legislations and rules related to preparation of
financial statements. It is the responsibility of FASB to establish and time to time update
reporting standards which are used by the financial professionals by the organizations.
The standards prescribed by such authority majorly helps managers and accountants to
present and disclose the financial information and accounting policies.
Financial accounting principles and rules: There are various financial accounting rules and
principles which all organizations must follow. Some of them are as follows:
Accounting rules: Some of the accounting rules are:
Ethical rules: Ethical rules are concerned with what is right and what is wrong. Some
guidelines are defined by various associations to feature the fundamental target and logical
reasons which are mandatory to follow by any organization (Horngren and et. al., 2012).
Financial ethics are related to general ethics which are essential for maintaining stability and
harmony in any organisation.
Measurement rules: Measurement rules are related to the money measurement in any
organization. Money measurement defines that an organisation should only record those
transactions which are expressed in terms of money. It helps in focusing only quantitative
information. Such rules are prescribed to measure the transactions and formulating policies for
future.
Boundary rules: Boundary rules are prepared to set future strengths of any organization.
Such rules defines what an organization should do and what not. These helps in establishing the
final documents on regular basis at the end of financial period. Such helps in recording the
transaction along with assumptions where the firm must go as well as various projects to be
accomplish at the end of the accounting year (Liao and et. al., 2014).
Accounting principles: Some of the accounting standards are as follows:
Going Concern: Going concern concept is a fundamental concept in financial
accounting. All organizations work on the principle that they will continue their operation in the
next accounting period and will not discontinue its operations due to any reason. Such concept is
applicable in all the organizations as whole.

Matching principle: Matching principle works according to the set guidelines in
accounting. The principle states that an organization should match its expenses with the related
revenues to determine the organizational profitability during a specific time period. The
guidelines shows that the expenses or revenues are based on the cause effect relationships.
Full disclosure: Full disclosure principle states that an organization should report all the
relevant information related to the organizational operations in the financial statements. The aim
of such principles are to share all the purpose full information with the outside world. Various
guidelines are provided to disclose the present transactions as well as future assumed
transactions in systematic manner.
Accounting Conventions: Accounting conventions are the guidelines which are considered at
the time of recording the transactions of the organization (May, 2013). Such are used under some
conditions when the definite guidelines are not prescribed to govern any situation.
Convention consistency: Convention consistency states that same management
accounting principle should be followed over various period of time while preparing the
financial statements. It helps in framing various conclusions in relation to the operations
performed during the period of times. Consistency of bookkeeping strategies and techniques
encourages bookkeepers to prepares the statement in efficient and systematic way.
Convention of materiality: Materiality is defined as the explanation of business
transactions. Such concept states that only those transactions are recorded which have important
facts and items at the same time useful for the organization. All the organizations should
discloses their important items and should neglects the unimportant items or transactions.
Purposes of financial accounting: Financial accounting serves various purposes in the
organization (Narayanaswamy, 2017). It helps in collecting and summarizing all the important
financial transactions for the preparation of statements, such as, income statement, cash flow
statement and financial position statements. Its main purpose is to provide the managers all the
important and relevant information to take effective decisions of the organization. Financial
accounting are prepared to provide relevant, reliable as well as comparable information about the
financial position, performance and cash flows about an organization which are useful to various
external stakeholders to take wide range of various decisions which benefits the society as
whole.
2. List of internal and external stakeholders of the organizational

Internal stakeholders: Internal stakeholders are those individual or group of individuals who
are involved in the operations processes within the organization (P Simnett and et. al., 2011).
Such people are directly and financially involved in the operational processes and have full
information related to the organization. Various internal stakeholders are as follows:
 Employees: Employees have interest in the financial information of the organization as
they are concerned about the continuity of operations as well as their jobs and the future
opportunities to grow in the organization.
 Owners: Owners have interest in the financial information of the organization as they are
the one who formulates the future strategies regarding where the organization will go and
maximising the profitability.
External stakeholders: External stakeholders are those who are not part of the business
processes but are interested in the performance as well as profitability of the organization
(Skogstad and et. al., 2011). These are those individuals whose actions defines the outcomes of
the business activity. Various external stakeholders are as follows:
 Customers: Customers have interest in the financial information of the organization as
they wants that the organization should provide high quality of goods and services at low
costs.
 Shareholders: Shareholders have interest in the financial information of the
organization, as they wants the organization to remain in profitable situations to get high
return on their investments in the organization.
 Suppliers: Suppliers have interest in the financial information of the organization as they
supply raw materials and wants the organization to buy them on continue basis to
maintain their profitability.
 Creditors: Creditors have interest in the financial information of the organization as they
wants repayment of the money, which they provided in credit in full and final settlement
as well as on time.
CLIENT 1
Journal Entries
Date Particular Debit Credit
01/05/16 Storage cost A/c............... Dr 450

To Bank A/c......................CR
(Being paid made through cheque)
450
02/05/16 Purchase A/c ….....................Dr
To S. Hood......................Cr
D. Main......................Cr
W. Tone......................Cr
R. foot.........................Cr
(Good purchase on credit)
6080
1450
2060
960
1610
03/05/16 T. Cole A/c...............................Dr
J. Allen A/c................................Dr
F. lane A/c.................................Dr
J. Wilson A/c.............................Dr
F. Syme A/c................................Dr
P. white A/c................................Dr
To Sales A/c.............................Cr
(Being goods sale to the creditors)
1650
1020
980
1200
2100
2520
9740
04/05/16 Motor A/c.......................................DR
To cash A/c........................Cr
(Being expenses made in cash)
470
470
07/05/16 Drawings A/c.........................................Dr
To cash A/c.............................................Cr
(Being cash use for personal purpose)
1500
1500
09/05/16 J. Fox A/c.....................................Dr
T. Cole A/c...................................Dr
To Sales A/c...................................Cr
(Good sold on credit)
1310
680
1990
11/05/16 Sales return A/c.........................Dr
To F. Syme A/c........................Cr
To J. Wilson A/c.......................Cr
680
410
270

(Being goods return to creditors)
16/05/16 Bank A/c.............................Dr
To F. Lane A/c.............................Cr
To P. Mullen A/c.........................Cr
To J. Wilson A/c..........................Cr
To F. Syme A/c.............................Cr
(Being payment received from debtors)
7020
3100
1400
850
1670
19/05/16 R. Foot A/c.............................Dr
To Purchase Return A/c............................Cr
(Goods return to R. foot)
50
50
22/05/16 Purchase A/c.................................Dr
To W. Wright.................................Cr
L. Mole......................................Cr
(Being good brought on credit)
3740
1910
1830
24/05/16 J. Brown A/c.....................................Dr
S. Hood A/c.......................................Dr
R. Foot A/c........................................Dr
To Bank A/c.....................................Cr
(Being payment made to creditors)
4600
3600
1400
9600
27/05/16 Salary A/c.....................Dr
To Bank A/c..................Cr
(Being Salary made through cheque)
4800
4800
30/05/16 Business Rate A/c..........................Dr
To bank A/c...................................Cr
(Rate paid through cheques)
1320
1320
Ledger posting
STORAGE COSTS ACCOUNT
DETAILS £ DATE DETAILS £

2018 2018
1 January Bank a/c 450 31 January Balance c/f 450
450 450
PURCHASES ACCOUNT
DETAILS £ DATE DETAILS £
2018 2018
02/01/18
S Hood
D Main
W Tone
R Foot
1,450
2,060
960
1,610
31/01/18 Balance c/f
9820
22/01/18 L Mole
W Wright
1,830
1,910
9820 9820
SALES ACCOUNT
DETAILS £ DATE DETAILS £
2018 2018
31/01/18 Balance c/f 11460 03/01/18
J Wilson
T Cole
F Syme
J Allen
P White
F Lane
1200
1650
2100
1020
2520
980

Client 2

c. Accounting concepts
Accounting concepts are the basic assumptions of the rules and regulations, which an
organization has to follow at the time of recording transactions and preparing the financial
statements.
Consistency: Consistency concept states that same management accounting principle
should be followed over various period while preparing the financial statements. The manager
ignores the consistency principle in an organization in order to make more revenues or profits.
Such concept is followed as it helps in making comparability between the results of different
times.
Prudence: Prudence concept states that an organization should not overvalue its
revenues, assets or profits also should not undervalue the liabilities, expenses or losses. It is a
fundamental concept, which helps in enhancing the trustworthiness in the financial statements of
the organizations. Figures and numbers must be considered at the time of preparation of financial
reports.