Comprehensive Financial Accounting Report and Case Studies

This report provides a comprehensive overview of financial accounting, covering its purpose, regulations, and fundamental principles. It defines financial accounting and its role in presenting financial performance and position to stakeholders. The report delves into accounting rules, including debit/credit principles for real, personal, and nominal accounts. It explores key accounting conventions like consistency and material disclosure, and includes detailed case studies with journal entries, ledger accounts, trial balances, and financial statements for multiple clients. The report also addresses topics such as bank reconciliation, control accounts, suspense accounts, and depreciation methods. Overall, the report offers a practical guide to financial accounting concepts and their application.

Finance accounting

Table of Contents
INTRODUCTION...........................................................................................................................4
BUSINESS REPORT......................................................................................................................4
1. Define financial accounting and its purpose ...........................................................................4
2. Regulations relating to financial accounting:..........................................................................5
3. Describe accounting rules and principles................................................................................5
4. Conventions and concepts relating to consistency and material disclosure............................6
CLIENT 1........................................................................................................................................7
(a) Journal Entry in the books of David:......................................................................................7
(b) Ledger Accounts:...................................................................................................................9
(c) Trial Balance as at 31st January, 2018:................................................................................14
CLIENT 2......................................................................................................................................16
(a) Statement of profit and loss for Peter Hampau for the year ended 31st July 2018 .............16
(b) Statement of financial position for Peter Hampau as at ended 31st July 2018 ...................17
CLIENT 3......................................................................................................................................18
(a) Profit and loss account of Bowling Limited:........................................................................18
(b) Balance Sheet of Bowling Limited......................................................................................18
(c) Accounts concepts : Consistency and Prudence:..................................................................19
(d) Purpose of depreciation in formulating accounting statements and methods of
Depreciation:..............................................................................................................................19
CLIENT 4......................................................................................................................................20
(i) Bank reconciliation statement at 1st December 2017:..........................................................20
(ii) Durrell Ltd's updated cash book for December 2017 :........................................................20
(iii) Bank Reconciliation Statement as at 31"t December 2017:...............................................21
CLIENT 5......................................................................................................................................21
(a) Sales Ledger Control and Purchase Ledger Control Account:.............................................21
(b) Control Account:..................................................................................................................22
CLIENT 6......................................................................................................................................22
(a) Suspense Account:................................................................................................................22
(b) Preparation of Trail Balance:...............................................................................................23

(c) Journal entries in order to show necessary corrections for eliminating suspense account
balance:......................................................................................................................................23
(d) Difference between a Suspense A/c and Clearing A/c:........................................................24
CONCLUSIONS............................................................................................................................24
REFERENCES .............................................................................................................................25

INTRODUCTION
Financial Accounting is an area of accounting that considers cash or other monetary
items as a basis of determination of performance rather than as a determinant of production. In
financial accounting process accounting data or information is classified as cash inflow and out
outflow in terms of revenue and expenditure, assets and liabilities. Financial data and
information are collected and then summarised in order to prepare financial statements, income
statements, cash flows, change in equity for reporting purpose (Edwards, 2013). In financial
accounting main motive of organisation is to present financial data and information in a
systematic manner for user of financial data such as investors, relevant authorities, lenders and
creditors, debtors etc. This report describes purpose of financial accounting, regulations
concerned with financial accounting, rules and principles of accounting, different aspects of
financial reporting including concepts and conventions related to consistency and material
disclosure.
BUSINESS REPORT
1. Define financial accounting and its purpose
Financial accounting: It refers to set of activities related to preparation of financial statements
to present or report financial performance and position to internal or external users of financial
data. Major activities of financial reporting includes recording, classifying, summarising,
posting, analysing and reporting of financial data or information of business organisation
including drafting of financial statements such as balance sheet, profit and loss and cash flow
analysis. Financial accounting not only covers monetary items but also non monetary items
which assists in reporting purpose. Financial accounting starts with collection of financial data
and information and ends with reporting of financial performance and position (Fourie, 2015). In
financial accounting process accounts are prepared in accordance with local and international
accounting assumption and standards.
Purpose of financial accounting: The primary purpose of financial accounting is reporting of
final accounts to external or internal. Financial accounting assists in compliance of rules and
regulations prescribed by relevant authorities. Financial accounting through internal check
ensures accuracy in recording of financial information and data. It assists in identification of
suitable accounting policies, assumptions, conventions and other fundamentals as per business

structure of organisation. Financial accounting provides a basis for choosing and implementing a
most appropriate strategy as per business requirement. Actual outcomes regarding financial
performance and position of business organisation under financial accounting process define the
objectives and goals of company.
2. Regulations relating to financial accounting:
Regulations refers steps normally in form of order, taken by relevant authority or
governing body to control and regulate activities of organisations or individuals. To establish
proper control and to maintain uniformity in accounts relevant authorities create regulations.
Regulations relating to financial accounting: Regulations provides guidance for preparation and
presentation of financial accounts such as generally accepted accounting policies and standards.
Some regulations are applicable for business organisations operating its business globally such as
IFRS (International financial reporting framework). For making uniformity in financial
accounting process some regulations are framed regarding accounting assumptions, concepts,
methods, conventions and policies (Hale and Held, 2012). For business organisation regulated
under any specific act, regulations are framed under such relevant act.
3. Describe accounting rules and principles
Data and information are initially recorded using accounting entries. There are some
accounting rules are discussed below which helps the organisation to smooth their financial
accounting process:
Debit what comes in, credit what goes out: This rule is mainly framed for real account.
Real accounts includes all assets of a firm whether tangible or intangible such as plant and
machinery account, furniture and fixture, goodwill, land and buildings account, free hold
premises etc. Real accounts are classified as Tangible real accounts and Intangible real accounts.
Tangible real accounts includes building accounts, plant account, inventory account etc. Whereas
Intangible real accounts includes accounts of items which do not have any physical existence
such as goodwill, patent, copyright etc.
Debit the receiver, credit the giver: This rule is framed for personal accounts. Personal
account refers to a general ledger account concerned with individuals, firms and associations like
creditors account, debtors account, capital account, banks account etc. Under this rule if person
give something to organisation it treated as inflow therefore personal account will be credited

and if person receive something from the organisation than amount should be debited on name of
person (Hall, 2012).
Debit all expenses and losses, credit all incomes and gains: This rules is framed for
nominal account. Nominal account refers to General ledger account concerned with all revenues
or income, expenses, losses and gains. In this rule capital is treated as liability for business and
liability shows credit balances. Incomes and gains leads to increase in capital therefore all
incomes and gains are credited whereas all expenses and losses should be debited because
expenses or losses leads to decrease in capital.
Principles: Following are the major principles of accounting that provides a framework for
preparation of final accounts, are as follows:
1. Dual aspect concept: Dual aspect concept truly resembles to double entry system.
According to dual aspect concept each and every transaction in an business organisation
affects both debit and credit side simultaneously. Under Single entry system only one
side of an account is affected which creates complexity in accounting calculation
therefore single entry system is avoided by entities (Jönsson, 2013).
2. Cost principle: This principle emphasises on reporting of assets on their cost. As per
this principle business organisation should record their assets on actual cost.
3. Matching principle: According to this principle, all expenses of business should be
matched with revenues which are occurred or being occurred in particular period.
4. Conventions and concepts relating to consistency and material disclosure
Accounting convention refers to guideline and framework for adoption of accounting
principles. It includes general practices and guidelines which assists in preparation of final
accounts (Mullinova, 2016). Accounting conventions are used in areas where no accounting
standard is prescribed. Conventions are applied by business organisations as per their
requirements to reduce complexity in accounting process.
 Convention of consistency: Conventions of consistency emphasises on maintaining
consistency in applied policies and assumptions from period to period. Use of this
convention assists in preparation of comparative accounts and to reduce complexities in
accounting process.

 Convention of material disclosure: This convention creates uniformity in disclosures of
materiel items in different organisations. Disclosure of material items in final accounts
helps to identify any fraud, error or irregularity in business organisation.
CLIENT 1
(a) Journal Entry in the books of David:
Date Particulars Debit Credit
01/01/18 Premises A/c …...........…........... Dr. 440000
Motor Van A/c…...........…...........Dr. 45250
fixtures A/c…...........…........... Dr. 10100
Inventory A/c …...........…...........Dr. 40900
P Mole A/c …...........…........... Dr. 2200
F Lane A/c…...........…........... Dr. 2100
Bank A/c …........... …........... Dr. 42400
Cash A/c …...........…........... Dr. 10600
To S Hamid A/c 10150
To J. Brown A/c 9600
To Capital A/c (Balancing Figure) 573800
(Being Owner's Capital is calculated )
Therefore, David Study's Capital at 1st January = £
573800
Date Particulars Debit Credit
01/01/18 Storage cost A/c…...........…........... Dr. 800
To bank A/c 800
(Being storage cost is paid)
02/01/18 Purchases A/c…...........…........... Dr. 7680

To S Hamid A/c 2450
To D Main A/c 2560
To W Tag A/c 1060
To R Foot A/c 1610
(Being goods purchases on credit from various parties)
03/01/18 J Wilson A/c …...........…...........Dr. 2020
T Cole A/c …...........…........... Dr. 1840
F Seema A/c…...........…........... Dr. 2380
J Allen A/c …...........…...........Dr. 990
P White A/c …...........…...........Dr. 2820
F Lane A/c …...........…...........Dr. 1170
To Sales A/c 11220
(Being goods sold on credit to various parties)
04/01/18 Motor Expenses A/c …...........…........... Dr. 670
To Cash A/c 670
(Being motor expense is paid)
07/01/18 Capital A/c…...........…...........Dr. 2000
To Cash A/c 2000
(Being cash withdrawal by owner himself)
09/01/18 T Cole A/c …...........…...........Dr. 1280
J fox A/c …...........…...........Dr. 2310
To Sales A/c
(Being goods purchase on credit with various parties)
11/01/18 Sale Return A/c …...........…...........Dr. 680
To J Wilson A/c 370

To F Seema A/c 310
(Being goods is returned back by the parties
16/01/18 Bank A/c …...........…...........Dr. 7150
Discount Allowed A/c …...........…........... Dr. 461
To P Mole A/c 1710
To F Lane A/c 3364
To J Wilson A/c 963
To F Seema A/c 1574
(Being Payment received from parties after allowing
discount @ 5%)
19/01/18 R Foot A/c …...........…........... Dr. 110
To Purchases Return A/c 110
(Being Goods is returned to creditor)
22/01/18 Purchases A/c …...........…...........Dr. 3140
To L Mole A/c 1330
To W Wright A/c 1810
(Being goods purchased on credit)
24/01/18 S Hamid A/c…...........…........... Dr. 3860
J Brown A/c …...........…...........Dr. 4260
R Foot A/c …...........…........... Dr. 1750
To Bank A/c 7500
To Discount Recieved A/c 2370
(Being payment is made to creditors after receiving
discount @ 10%)
27/01/18 Salaries A/c …...........…........... Dr. 14500

To Bank A/c 14500
(Being salaries are paid through cheque)
30/01/18 Business Rates A/c …...........…........... Dr. 2220
To Bank A/c 2220
(Being business rates are paid through cheque)
(b) Ledger Accounts:
Storage Cost A/c
Date Particulars Amount Date Particulars Amount
01/07/18 To Bank A/c 800 31/07/18 By Profit & Loss A/c 800
Total 800 Total 800
Sales A/c
Date Particulars Amount Date Particulars Amount
31/01/18 To Trading and
P&L A/c
14810 03/01/18 By J Wilson A/c 2020
By T Cole A/c 1840
By F Seema A/c 2380
By J Allen A/c 990
By P White A/c 2820
By F Lane A/c 1170
09/01/18 By T Cole A/c 1280
By J fox A/c 2310
Total 14810 Total 14810
S Hamid A/c
Date Particulars Amount Date Particulars Amount
24/01/18 To Discount
Received A/c
1260 01/01/18 By Opening Balance
(B/f)
10150

To Bank A/c 2600 02/01/18 By purchases A/c 2450
31/01/18 To Closing
Balance C/d
8740
Total 12600 Total 12600
W Tag A/c
Date Particulars Amount Date Particulars Amount
31/01/18 To Closing
Balance C/d
1060 02/01/18 By purchases A/c 1060
Total 1060 Total 1060
J Wilson A/c
Date Particulars Amount Date Particulars Amount
03/01/18 To Sales A/c 2020 11/01/18 By Sales Return A/c 370
16/01/18 By Bank A/c 880
By Discount Allowed
A/c
83
31/01/18 By Closing Balance c/d 687
Total 2020 Total 2020
F Seema A/c
Date Particulars Amount Date Particulars Amount
03/01/18 To Sales A/c 2380 11/01/18 By Sales Return A/c 310
16/01/18 By Bank A/c 1470
By Discount Allowed
A/c
104
31/01/18 By Closing Balance c/d 496
Total 2380 Total 2380
P White A/c
Date Particulars Amount Date Particulars Amount

03/01/18 To Sales A/c 2820 31/01/18 By Closing Balance c/d 2820
Total 2820 Total 2820
P Mole A/c
Date Particulars Amount Date Particulars Amount
01/01/18 To Opening
Balance (B/f)
2200 16/01/18 By Bank A/c 1600
By Discount Allowed
A/c
110
31/01/18 By Closing Balance c/d 490
Total 2200 Total 2200
Capital A/c
Date Particulars Amount Date Particulars Amount
07/01/18 To Cash A/c 2000 01/01/18 By Opening Balance b/f 573800
31/01/18 To Closing
Balance C/d
571800
Total 573800 Total 573800
J fox A/c
Date Particulars Amount Date Particulars Amount
09/01/18 To Sales A/c 2310 31/01/18 By Closing Balance c/d 2310
Total 2310 Total 2310
Motor Van A/c
Date Particulars Amount Date Particulars Amount
01/01/18 To Opening
Balance (B/f)
45250 31/01/18 By Closing Balance c/d 45250