Financial Accounting Report: HNBS 310 - Semester 1, 2019-20

This report presents a comprehensive analysis of financial accounting principles and practices. It begins with an introduction to financial accounting and its importance, followed by an exploration of different types of business transactions, including internal and external transactions. The report then delves into the mechanics of double-entry bookkeeping, journal entries, ledger accounts, and trial balances. It differentiates between financial reports and financial statements, outlining their respective scopes, governance, and uses. The report also examines fundamental accounting principles such as the monetary unit assumption, going concern, and the matching principle. Furthermore, it provides examples of profit and loss accounts and balance sheets. The second scenario covers bank reconciliations, explaining the process and the reasons for discrepancies. The report also describes outstanding checks, NSF, and transit cash deposits. Finally, the report concludes with a discussion of the importance of bank reconciliation and suspense accounts. This report provides a detailed overview of the core concepts and practical applications in financial accounting.

Financial accounting

Contents
INTRODUCTION.....................................................................................................................................3
SCENARIO 1.............................................................................................................................................3
Question 1...............................................................................................................................................3
Question 2...............................................................................................................................................5
Question 3.............................................................................................................................................10
Question 4.............................................................................................................................................12
Question 5.............................................................................................................................................14
SCENARIO 2...........................................................................................................................................16
Question 1.............................................................................................................................................16
Question 2.............................................................................................................................................17
Question 3.............................................................................................................................................18
Question 4.............................................................................................................................................19
Question 5.............................................................................................................................................21
CONCLUSION........................................................................................................................................22
REFERENCES........................................................................................................................................23

INTRODUCTION
Financial accounting relates to the methods or mechanism utilized by an institution to file
financial documents for the purpose of presenting its financial status and results to individuals
such as shareholders, owners, consumers and suppliers (Weygandt, Kimmel and Kieso, 2019).
Simply stated, it is a special accounting division that involves various procedures such as
tracking, outlining and documenting transaction details over a specified period of time.
The project report is categorized in two different section and each of them consist a vital
range of information. Under first section, there are five questions which are related to preparation
of journal entries, trial balance etc. As well as under section, there is also five question which
involves range of information such as preparation of financial statement along with bank
reconciliation statements and suspense account.
SCENARIO 1
Question 1
Types of business transaction
Business sales present as an occurrence that has arisen within a commercial activity and
can be accurate in terms of cash. Commercial sales have a financial or other impact on the
company. There are multiple types of commercial transfers, many of which are categorized into
both internal and external exchanges. This is defined as in the following:
Internal business transactions- External parties' participation in this deal is not authorized.
These sales have a significant influence on the organization's financial results because they do
not require the sharing of interests with third parties. For instance: inner financial transactions
involve recording amortization of fixed assets and the weaken of fire-reasoned assets etc.
External business transactions- A company shares money with third parties inside such
transactions. These are simple transactions which are carried out every day by the organization
(Muda, 2016). For example: external purchases involve selling products to buyers, purchasing
supplies from manufacturers, paying gas electric or water bills, paying wages to workers etc.
Single entry and double entry book keeping

Single entry record keeping applies to an easy and one-way form of bookkeeping. Wherein each
and every company activity is reported as a single entry in journal at the very same time. Single
entry record keeping is a cash-based accounting strategy that records all input and output interest
in a journal.
Date Description Transaction value Balance
XX-XX-XXXX £000.00 £000.00
Double entry book keeping is another type of technique for prerecorded commercial transactions
in which each transaction is made; an entrance is documented in at least 2 credit or debit account
names. The sum of capital is reported in a double-entry scheme, as debits will be equivalent to
the sums of capital registered as credits. As per the financial theorem, double-entry bookkeeping
scheme operates like Assets= Liabilities + Owner's money. Double entry book attempting to
keep framework would be shown as below:
Date Description L.F Debit Credit
XX-XX-XXXX £000.00
£000.00
Trial balance and its importance
Trial balance is implemented as a reporting or scheduling report and involves lists of the balance
in the account in the general ledger of each company (Kimmel, Weygandt and Trenholm, 2016).
The debit balance volumes are planned in a section with the suitable heading "Debit balances"
and also the credit balance volumes are scheduled in an additional column with the exact going
to head "Credit balances." Trial balance is of various importance which helps an entity in its
commercial transactions. Explaining two of the core significance of trail equilibrium as below:
• Trial balance is an appropriate tool that will help the corporation to check the accuracy of their
transactions by ensuring equal trial balances for both parties.

• The trial amount reflects the credit and debit value of the purchases. If the debit balance doesn't
really align the credit balance it implies that the database contains few inaccuracies. Trail
balance hence helps an organization to locate mistakes.
• Trail balance aid firm to plan final reports. It holds the checking account record and helps an
entity in planning final report. Final report should be calculated at the end of the financial year
by understanding a firm's financial status, operational results and efficiency.
Format of trial balance
Account name Debit (£000) Credit (£000)
Question 2
This includes the presentation of journal entries, ledger accounts and trial balance.
Journal entries in relation to each transaction

Ledger accounts

Trail balance

Question 3.
Difference between financial report and statement
Financial statements recognize as the text that includes details relating to an
organization's all monetary transactions. The primary reason behind such a report 's growth is to
document each of a company's financial statements to evaluate its impact on organizational
functioning. With regard to study specification there is no set amount of time (Christensen,
Cottrell and Budd, 2016).
Financial statements, however, are distinct from those characterized above in the financial
statement. Financial report is the required report that each company has to file for disclosure to
the creditors about their income and loss. The other distinction that is fully evident in all
finances.
Origin of variance Financial report Financial statement
Content It contains a detailed information
about a company’s money
This comprises only certain
transactions and details the

transactions. regulatory body gives priority to
authorities.
Governance The whole Financial Reporting
cycle is regulated by IASB.
Which is recognized as the
Universal Council on Accounting
Practices.
Here, the Financial Reporting
method is regulated by the
principles defined by IASB.
Scope Application of financial
statements the breadth of the
financial report is broad. This
should be known on two grounds:
first, all cash transactions are
viewed in this way, and secondly,
all financial results are receipts,
but not all financial records and
accounts.
Compared to financial reports the
level of financial statements is
restrictive. This is because there
are only limited transactions
recorded under the same.
Examples There are various instances that
can be given as an illustration of a
financial report which involves
pay slip, account receivable, bad
debt reports, debtor appraisal
document etc.
There are actually no instances of
the financial statements. But, this
is of 4 kinds like income statement
, balance sheet, cash flows, and
equity transformation statement.
Requirement Business administrators are
expected to have such reports so
they need the knowledge that a
company has rendered how many
expenditures and investments and
they can create successful
strategies for the upcoming era.
The breadth and usage of such
Financial statements used
throughout the companies are for
the reasons only. These are
essentially researched by an
organization and its stakeholders
in regards to a firm's earnings
quality falsification, role, cash
availability and position in the

records is greater than that of
others, because these would
include all details pertaining to an
organization. In addition, these
reports are also used by
government in the context of an
investment plan via which they
can achieve a large number of
earnings together with a reduction
in expenditure
market. Furthermore, these
findings are also used by potential
financing in connection with or not
making decisions about capital
expenditure in the organization.
Users These accounts are widely used
for the specific range of
consumers including corporate
owners, board leaders and many
other recipients of financial
statements because they are often
part of financial reporting.
Users who frequently use financial
statements involve shareholders,
suppliers , creditors, customers, the
public, gov't, debt holders and
many others.
Question 4.
Description of the fundamental principles of accounting
Crucial standards in bookkeeping are rules that restrict and restrict businesses while creating
overviews of budgets and detailing data related to income. There are numerous important criteria
which govern the organization. Such criteria draw on the metrics offered by "often recognized
bookkeeping plugs" and "globally disclosing budgetary rules." A part of the essential
bookkeeping requirements includes:
Monetary substance presumption: Under this law, it is important to grant a business
organization its own character and identity, through which it will function together (Demerjian,
2017). The company organization aspect must not be precisely the same as the owner 's portion

Money related unit supposition: The law specifies that all the expenditure sharing that
happened in a market organization must be reported using an analogous fiscal unit with the
purpose of ensuring identification and continuity.
Complete honesty guideline: This monetary rule is a principle for the whole company
community that specifies that all business transactions must be reported in the fiscal accounts of
the corporation in order to make a fair and rational judgement on the operation and status of the
entity relative to revenue.
Going concern standard: Under this rule, a corporate organization will in any situation
continue to function on the basis of the death of the owner. Even where a business relationship
was degraded, it was assumed to continue
Materiality guideline: This standard states that single money related exchange can be
documented in the company material's budget reports and that these transactions must be
transcribed when they occur so that the organization receives or pays a financial value.
Income acknowledgment standard: Sum may only be viewed or registered by the company
when it is obtained and not when the organization obtains it.
Coordinating standard: As per this rule, which applies as a rule to industry groups, the
accumulation of the charges and the credit balance of the tax reports must be comparable or
organized. The expenses of a product should be regularly organized from the revenues generated
by that organization.
Standard of Conservatism: It is one of the most fundamental principles for business entities, in
which the official business organizations must necessarily be mild and which should be formed
to the most visibly awful (Campbell, Khan and Pierce, 2018). As implied by this method, the
predicted financial position in the organization should be regularly reported in the association
when it is eventually collected and the usual cash outflow should be documented where there is
confusion regarding the spike. This process helped in a long term money-related emergency
affiliation.

Question 5
Profit and Loss Account
Balance Sheet

SCENARIO 2
Question 1.
Description about bank reconciliation
Bank reconciliation typically refers to memorandum account that presents the organization
with an ability to align its financial information with amount of data revealed from entity's bank
statement. This includes comparing the two separate books of an organization's cash books and
bank statements provided by their respective banks to the same entity that depicts all bank
transfers. This is critical for conducting from an organization's side because it could enable to
assess the discrepancy among these both books' balance. It gives the company an ability to
identify the mistakes and make improvements in both such books to determine the Actual sum.
All the facts given in entity's bank statement is supplied by banks that includes recording all
money transfers that directly affect an organization's bank account. There are several
explanations why the contrast between two books did not fit as well as need to conduct bank
reconciliation procedure in terms of having the discrepancy (Schroeder, Clark and Cathey,
2019).
The mentioned as main causes behind Bank reconciliation preparation usually involve
outstanding cheques, NSFs, and transit cash deposits etc.. That's because sometimes
when amount sum deposited in bank account is not expressed directly in bank's pass book as it
requires certain time and which is the reason that divergent generates in these books' balance.
There are also other factors why preparing BRS is quite necessary- for example outstanding
cheques. In this situation, when payment is provided in cheque, then party made credit
entry towards this without depositing such cheque in bank. This becomes the reason why
because of which distinction the books generate and have to use BRS approach to estimate where
mistake arises and what needs to be mentioned in sums for rectifications. But at other side, the
rationale for such variation in sum is NFS. Here NFS implies inadequate amount in account.
there've certain situations in which the payments is paid in cheques and these same is deposited
in account however subsequently dishonoured as the sum is not deposited in bank because
another party does not have enough money in bank. In this scenario, the receiving party has
made cash book entry, however there no actual deposit made in the bank account. This is also

an explanation why it is noticeable varying in the sum of both books. The same should go for
rectification with the help of the BRS (Kimmel, Weygandt and Kieso, 2018).
So preparing BRS is pertinent from point of discarding any variability in the sum of cash
and bank statement along with keeping the detailed records which do not represent the
inconsistency in any way. This also allows an organization's leadership to make the suitable
decisions through which they can more efficiently execute business processes in the near future
or for long term.
Question 2.
Description about control accounts
Control accounts could be described as record involving money that is generated to be
maintained with general record. Such accounts summarize the equalisation in peripheral records
to provide a condensed viewpoint on accounts that have large amount of
transactions. Payments to be received from parties, due and lender liabilities is most widely
regarded records from which adjustments are added through control accounts. Each of these
accounts are journals with a large no. of exchanges for most part, as well as it is essential to
summarize them using control account when requesting to evaluate them. In comparison to
reporting in the entity's general records, here equalizations of these records are reported
in auxiliary level records account according to money-related accounting procedure (Robson,
Young and Power, 2017).
At the same time, control accounts play essential and critical role in financial management
mechanism for an organization. Here are several aspects which assist in this regard, as follows:
 The key objective of different control accounts in the field of the financial management is
to maintain general ledger clear from unnecessary details so that this will not be difficult
in long run to comprehend the factual information.
 Control accounts have function of providing the effective correct balance sum by which
reliable financial statements can be produced from which financial management
dimension can be achieved.
 The monitor helps to include condensed details as well as comprehensive information
in subsidiary accounts from where feasible to grasp all required information with no

misunderstanding and could be further employed for the auditing and cost
accounts formation purposes (Pratt, 2016).
Question 3.
Description about suspense account
Suspense account generally relates to general account wherein the sum or figures
are recorded for a brief span of time-span so that it can be recognized from wherever the sum is
identified and which account it should be noted. Such an account is formed if a business aspect
is departed with an unknown financial sum that has no objective to be noted in, at a certain point
a memorandum record is formed to record this record for only a transitional period, such that the
connection can sound right about what account such sum should be reported in as well as
what correct purpose is. The Suspense account is formulated by accounts or finance manager
of organization for the accomplishment of many facets and for certain purposes (Warren and
Jones, 2018). Several of them are described below:
 The primary reason behind creation of a suspense account is just to comprehend why the
credits and debits sides of entity's trial balance do not matching. This is quite clear that
this is not achievable to further form entity's financial statements without matching trial
balance's both side. As far as the creation of an entity's financial statements is essential,
it is therefore necessary to open a suspense account in books to balance of trial-balance.
 The other explanation for the drawing up of a suspense account is that company collects
the a payment but doesn't have any information against which this has been recorded.
Thus, with regard to the creation of financial statements for a specified time period,
a specific suspense account shall be reported with same amount received by the
organization in order to prepare the financial statements effectively.
 The other possible explanation that the organization considered necessary to introduce
a suspense account is when any fixed asset is purchased, but invoice doesn't show proper
description and use of such asset within organisation. Thus, in this situation, the
accounts manager needs to report this in suspense account till uncertainty involved with
transaction get cleared. After proper justifications subsequently at the time of finalisation
of accounts accountant may record the transaction in relaxant account and eliminate
balance of suspense account.

Question 4
It comprises the presenting a revised/updated cash account, bank reconciliation statement
and showing distinction between other items, including bank charges, standing payment order,
cheque bounce and direct expense debit.
Updated bank reconciliation and cash book as on 28th February 2010
Difference between standing order, direct debit, dis-honour cheque and bank charges
Direct debit Standing order Bank charges Dis-honour
Cheque
Meaning It is kind of service
that is provided to
the clients by banks.
In this system,
customer can
provide their bank
with an
instantaneous
request to pay an
amount from one ‘s
This service is
like immediate
charge, but if a
permanent
request arises,
customers are
only allowed to
set up for their
bank to allow an
instalment for
Bank
charges implies to
charges paid by
the customers to
their banking
institutions against
any premium or
additional services
or facilities used
by them. These
Usually, when a
cheque is
disbursed by
anyone for
collections or
for
making payment
at teller
counter, banker
makes payment

ledger at ordinary
time frame. This
capacity is a
supported assistance
that banks offer to
their customers.
their benefits if
the instalment is
of particular
value expressed
by customer on
a standard basis.
offices may
include direct
charges as well as
standing demands
previously made.
This charges costs
is compulsory
charge to bank's
customer
(Narayanaswamy,
2017).
of such cheque
presented.
Whenever a
cheque is
being returned
by banker for
one or even
more causes,
this is
called as dishon
oured cheque
which is also
recognized as
bouncing of
cheque.
Illustratio
n
A customer can
coordinate to bank
for take care of
his/her general
utility bills, such as
energy, gas, and so
forth, on a regular
basis, since these
bills were due to a
particular time
frame. It must be
taken into account
that clients may also
ask to pay the sum at
A client may
submit standing
request
with bank to
make
instalments for
their part of the
loan, term-debts,
and so on, since
these payments
are of fixed
value and are
acquired
A client must pay
fees for
using ATM
services,
overdraft facilities
and,
towards additional
book cheque book
requests.
The cheque is
held to be
bounce or dis-
honoured when t
he client's
account not
have requisite
amount.

any time given in the
usual period, such
as month or quarter.
on normal basis.
Question 5
This comprises presentation of appropriate journal entries as well as suspense account.
Journal entries
Suspense account

CONCLUSION
From above study-report, this has been concluded that financial accounting is not just a
notion, but a protocol that is adopted by each organization to document their commercial
transactions and, subsequently, to draw up financial reports of those documentation. The above
study discusses the main financial concepts and key accounts from which this has been
ascertained that entity's financial statements and other related reports are not exactly same as the
others, but are produced by the use of mechanism of financial accounting rules and relevant
policies.

REFERENCES
Books and Journals:
Schroeder, R.G., Clark, M.W. and Cathey, J.M., 2019. Financial accounting theory and
analysis: text and cases. John Wiley & Sons.
Kimmel, P.D., Weygandt, J.J. and Kieso, D.E., 2018. Financial accounting: Tools for business
decision making. John Wiley & Sons.
Robson, K., Young, J. and Power, M., 2017. Themed section on financial accounting as social
and organizational practice: exploring the work of financial reporting. Accounting,
Organizations and Society, 56, pp.35-37.
Pratt, J., 2016. Financial accounting in an economic context. John Wiley & Sons.
Warren, C. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Narayanaswamy, R., 2017. Financial accounting: a managerial perspective. PHI Learning Pvt.
Ltd..
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2019. Financial accounting. John Wiley &
Sons.
Muda, I., 2016. The Skills and Understangding of Rural Enterprise Management of the
Preparation of Financial Statements Using Financial Accounting Standards (IFRS)
Finacial Statement on the Entities Without Public Accountability (ETAP) Framework
on the Implementation of Village Administration Law.
Kimmel, P.D., Weygandt, J.J., Kieso, D.E. and Trenholm, B., 2016. Financial Accounting.
Wiley Custom Learning Solutions.
Christensen, T.E., Cottrell, D.M. and Budd, C., 2016. Advanced financial accounting. NY
McGraw-Hill/ Irwin,.
Demerjian, P.R., 2017. Calculating efficiency with financial accounting data: Data
envelopment analysis for accounting researchers. Available at SSRN 2993687.
Campbell, J.L., Khan, U. and Pierce, S., 2018. The effect of mandatory disclosure on market
inefficiencies: Evidence from Statement of Financial Accounting Standard Number
161. Columbia Business School Research Paper, (17-94).