Comprehensive Financial Accounting Report: Concepts and Calculations

This report delves into the core principles of financial accounting, beginning with an introduction to the accounting process and its importance in evaluating a company's financial health. It explores different types of business transactions within single and double-entry bookkeeping systems, elucidating the roles of sales, purchases, and receipts. The report also covers the creation of trial balances and their significance in accounting. It then distinguishes between financial statements and financial reports, detailing the components of income statements, balance sheets, and cash flow statements. The report includes calculations and examples to illustrate key concepts. It further examines accounting principles, such as full disclosure, materiality, consistency, monetary unit, and going concern. The report extends to scenarios involving bank reconciliations, control accounts, and suspense accounts, complete with journal entries and updated cash books, providing a holistic view of financial accounting practices.

Financial Accounting

Contents
INTRODUCTION...........................................................................................................................................3
QUESTION 1.................................................................................................................................................3
Different types of business transaction...................................................................................................3
QUESTION 2.................................................................................................................................................5
Calculation...............................................................................................................................................5
QUESTION 3...............................................................................................................................................10
Different between financial statement and financial report.................................................................10
QUESTION 4...............................................................................................................................................12
Principles of accounting.........................................................................................................................12
QUESTION 5...............................................................................................................................................13
Calculation.............................................................................................................................................13
QUESTION 6...............................................................................................................................................16
Profit and Loss Account.........................................................................................................................16
QUESTION 7...............................................................................................................................................17
Cash flow statement..............................................................................................................................17
SCENARIO 2...............................................................................................................................................19
QUESTION 1...............................................................................................................................................19
Bank Reconciliation...............................................................................................................................19
QUESTION 2...............................................................................................................................................20
Control accounts....................................................................................................................................20
QUESTION 3...............................................................................................................................................21
Suspense Account..................................................................................................................................21
QUESTION 4...............................................................................................................................................21
(a) Required to prepare updated cash book and bank reconciliation statement..................................21
QUESTION 5...............................................................................................................................................23
Journal entries.......................................................................................................................................23
CONCLUSION.............................................................................................................................................25
REFERENCES..............................................................................................................................................26

INTRODUCTION
Accounting is a process of identifying, recording, assessing, categorizing, verifying,
assessing, understanding, and distributing financial data in a systematic manner. It shows the
profit or loss for a certain time as well as the worth of the company's assets, obligations, and
stock. Accounting is the activity of recording and reporting a company's financial activities.
Referencing, analyzing, and supervising those transactions to regulatory bodies, regulatory
authorities, and customs officials are all part of the tax investigation process. (Kustono and
Nanggala, 2020). This paper covers a variety of subjects, including how to record company
transactions using a single or double entry bookkeeping system, how to create balance sheet
utilizing proper accounting standards, and how to execute bank reconciliation. It also discusses
the control and suspense account, as well as why it is necessary for writing.
QUESTION 1
Different types of business transaction
In single and double entry accounting, there are numerous sorts of business transactions. It
is divided into four primary categories, as follows:
Sales: This is an activity whereby the organization trade internationally towards another
corporation but instead gives the revenue to the customers or obtains stocks on margin. Such
sellers and buyers activities are recorded in accounting record, which become typically examined
for marketing purpose, producing in journals and many other archives. In this activity, customers
will be debited, while sales entities will be credited.
Purchase: Whereas a corporation or anyone purchase things, this operation is regarded as a sale.
If the framework makes item, the payments will be recorded in the accounting period to the
purchase account, and indeed the individual or creditors to which the payment was delivered will
be credited. This type of conduct is typically carried either in goods sold or services. Every
activity was also reflected in the financial statement for the intention of accounting.
Receipts: Some costs apply to certain other companies and individuals that whenever a
government taxes for delivering the services to yet another company. Additionally, those sales

are recorded in publications, with retailers having debited to business receivables as debit, cash,
or credit payments (Roychowdhury, Shroff and Verdi, 2019).
Define single entry book keeping:
It is an accounting system which is used to record all of a company's commercial
transactions. Each payment system has had its own entry, with the majority of the entries
registering either incoming or outgoing cash. Transactions are recorded in the "cash book,"
which is a spreadsheet with sections for time, description, or if the operation represents an
expense or profit.
Define double entry book keeping:
It is based on the fact how each operation appears to have two sides and, as a result, will
affect two balance sheets. A debit input into one bank and a high credit into some other account
are included in each action. It guarantees that each activity is recorded in different sides: one is
debit because it gathers worth, and another is rewarded because it has significance.
Explain trial balance and its importance:
Different entries in many categories will make up a ledger. Trial Balance is the process of
combining all ledger balances into a single worksheet as of a specific date. At the conclusion of
each monthly, the group examines its activities and divides them into several categories. They
are currently creating a sheet and categorizing the categories as successful or ineffective.
Following the compilation of diary entries and publishing to accounting records, an accounting
equation is the third phase in the production of books of accounts (Aini, Anoesyirwan and Ana,
2020). The various ledger accounts are weighed and the ending amounts are computed once the
required documents are published to the accounting records. Those ending amounts (together
with their corresponding debits and credits) are transferred over the financial statement to see if
the debit card transactions and credits totals are identical.

QUESTION 2
Calculation

Ledger accounts

Trial Balance

QUESTION 3
Different between financial statement and financial report
Financial statement: The objective of financial reporting is to provide an understanding
of a company's financial condition, future revenues, and process efficiency. This system helps
consumers to make decisions about capital allocation. The income statement, balance sheet, and
profit and loss account are the three most well-known income reports.
• The net income that declares the shareholder's earnings and spending in order to earn profit and
indicates the quantity of earnings as well as the nature of aspect of financial. It can be used to
investigate the performance (Shakespeare, 2020).
• The balance sheet's purpose is to reveal the union's current financial situation as of the
balancing file's time. It was used to forecast things like strain, borrowing, and finance.

• The structure of cash receipts and disbursements is considered using the cash flow statement.
Although bank deposits do not always match the revenue and expenditures shown in the
financial statements, it is a very useful financial report.
Financial reports can also be used to make a variety of decisions, including financial
transactions, asset allocation, tax considerations, and client judgments.
Financial Reports: Financial reports collect and disseminate essential financial facts to the
general public. Monetary file is processed available to the general public in order to pique their
invested interest. Yearly profits are published in news reports, via video call, or on the
company's site.
Regulatory organizations including the Securities & Exchange Board get regular financial
statements. It is important that the yearly statistics are accurate and up to date. The information
provided above enables the firm to make well-informed business choices and ensuring
accountability and a good image. A strong financial accounting system is simple for using,
trustworthy, and easy to understand (Al-Dmour, 2019).
In the framework of Financial Company, there are also many users of financial reporting, which
are mentioned below:
 Owner: Investors and stockholders seek financial expertise to help them decide whether
to keep, buy, or transfer more of their properties.
 Management: Owners and managers might be involved in management. In smaller firms,
meanwhile, process is usually comprised of paid experts who have been tasked with
directing the company or an industry sector. They perform the function of open software
controllers.
 Staff members: These individuals are concerned about the company's long-term viability
and existence. They're all about whether or not firm can pay workers' wages and qualify
for benefits. They may also be interested in the financial condition and outcomes in order
to assess corporate development and employment progression prospects.

 Customers: Whenever a management and the employees have had a long-term
involvement or contract, clients get invested in the organization's ability to outlast its
existence and maintain structural integrity. This requirement is heightened in situations in
which the individual's customers depend on it (Weikmans and Roberts, 2019).
 Shareholders: Accounting information is required by prospective buyers in order to
analyses the company's operating profit possibilities. Likewise, small businesses want
financial data to decide whether such an investment is profitable and whether it can be
continued, enhanced, or abandoned.
Although the number of people who utilize financial reporting is reduced, there are still
some who need it to make choices. They might be both internally and externally available in the
financial data. Likewise, Ray Finance limited prepares financial reports for its customers to
utilize.
QUESTION 4
Principles of accounting
There are mentioned different types of principles of accounting use by the most of the
organisations mentioned below:
Full disclosure principle: The full disclosure concept asserts that all data which might influence
a reader's comprehension of a company's financial statements, including terms of accounting
standards employed, should be included in these declarations. Because the measure of data that
may be supplied is possibly vast, the application of this concept is extremely judgmental. It is
typical to only publish details concerning occurrences that really are likely to have a significant
effect on the object's money position or economic condition in order to limit the quantity of
reporting. In reality, when it comes to privately created financial reports, the full disclosure idea
is rarely used since leadership could like to see the “bare bones” financial reports (Kholid,
Alvian and Tumewang, 2020).
Materiality principle: According to the materiality principle, an advance payment can be
disregarded whereas if effect on the financial reports is so little that a reader of the financial
reports would not be deceived. If an item is inconsequential, you are not required to follow the
terms of an accrual basis under generally accepted accounting (GAAP). Because this term does

not give clear assistance in separating key facts from inconsequential data, determining whether
a deal is material requires judgment.
Consistency Principle: The consistency principle argues that once you've adopted an accounting
period or technique, it should stick to it in subsequent financial period so that the outcomes are
similar. Businesses can, though, modify an accounting principle or procedure if the new version
makes the stated quarterly earnings more helpful. For example, GAAP permits a variety of
approaches to revenue recognition.
Monetary unit principle: Revenue should be recognized once it is generated, not when it is
received, according to the revenue is recognized. The idea of financial reporting is fundamental
of financial basis, which means because when you issue an invoices for a client for services and
products, the value of that bill is recognized as income at that time, which is when the cash is
collected from the client.
Going concern principle: The concept of a continuing business is a good element of widely
accepted accounting principles. Organizations would be unable to conduct accumulated or
prepaid costs without it. The going concern concept permits a company to postpone part of its
before the costs to accumulated other comprehensive income instead of having to recognize
those at once.
QUESTION 5
Calculation
Profit & loss statement: This statement is an element of a financial report and also a
financial statement, and it is created to determine the entire profit a company organisation may
make inside a particular period, which again is usually referred to as term closed. With the aid of
this financial report, an institution's manager may determine the profit ratio, its connection, and
the impact of different adjustments to the revenue and expenses. In this example, the gross profit
is 83000 dollars, and the net profit is 17047 dollars after all of the adjustments of bed debts,
devaluation, and delayed or advanced payments of financial and rental obligations. All of these
factors have a dray effect, and in order to precisely modify this aspect, the company must
observe GAAP rules (Kiradoo, 2020)).

Balance sheet: A balance sheet is a financial statement that shows how much an
institution's assets and liabilities are worth at the conclusion of the fiscal year. It depicts the
assets and liabilities, as well as the impact of numerous factors on them. In this scenario, the
financial assets values on the balance sheet have always been 143845. Whereas if asset and
liability values vary, it implies that almost all of the records and transactions are not kept in a
structured manner. The balance sheet is designed to represent the equilibrium and to assist us in
making strategic business decisions activity.
Profit and loss a/c
Particulars Amoun
t
Particulars amoun
t
Opening stock 9,500 Sales – 125,000
Purchase – 75000 Less: Return - 1000 124,00
0
Less: Return – 1500 73,500 Closing stock 1,000
Wages and salaries 13,200
Gross profit 28,800
125,000 125,00
0
Rent and rates – 1500 Gross profit 28,800
Add: Outstanding rates –
340
1,160 Interest received 1,000
Postage 900 Rent received - 4850
Insurance - 7500 Less: Advance rent –
490
4,360

Less: Prepaid insurance –
411
7,089
Bad debt write off 650
Net profit 24361
34,160 34,160
Balance sheet
Liabilities amount Assets Amount
Capital – 120,800 Bank 10,594
Less: Drawings – 5,150 Cash 340
Add: Net profit –
24361
140,011 Prepaid insurance 411
Provision for bad
debts
934 Advance rent 490
Debtor - 12500
Creditor 3,900 Less: Bad debt write off –
934
11,850
Outstanding rates 340 Motor van at WDV – 19600
Less: Dep - 5000 14,600
Loan 100,000
Closing stock 1,000

145,185 145,185
QUESTION 6
Profit and Loss Account
Balance Sheet

QUESTION 7
Cash flow statement
A cash flow statement details all of a company's revenue and liabilities within a certain
time frame. It indicates a ratio that measures company sustainability by revealing if it has
sufficient cash flow to pay its workers and obligations. If it does, the business is said to have a
"good" cash flow.
 Profits without taxes are used to generate cash flows from operational operations.
Nonmonetary expenses and revenue are subtracted from earnings before interest and
taxes. Other noncash revenue and expense is mostly due to sampling impacts involved in
financial assets and fair value fluctuations associated with investment strategies.
Following accounting for revenues and expenses, it would include adjustments in leased
items and investment banking receivable, this leads in retained earnings from operational
operations (Almaqtari and et.al, 2020).
 Adding to land, plants, and machinery and capital assets, as well as adding to capitalized
development expenses and investing in stocks, mortgages, and savings accounts, are all
examples of investing activities.
 Outlays of cash from dividend payouts and bond redemptions, imports from equity
capital and begin to contract, and changes in other financial obligations are all examples
of finance operations.

 For example:
 Here’s how a cash flow statement looks like:

Cash flow operating activities
Increase (decrease) in accounts receivable 25,000
Increase (decrease) in accounts payable (5,000)
Net cash flow from operating activities 20,000
Cash flow from investing activities
Purchase of land (20,000)
Sale of equipment 5,000
Net cash flow from investing activities (15,000)
Cash flow from financing activities
Dividends paid (3,000)
Increase in bank loans 0
Net cash flow from financing activities (3,000)
Net increase/decrease in cash 2,000
Cash at beginning of period 5,000

Cash at end of period 7,000
SCENARIO 2
QUESTION 1
Bank Reconciliation
This may be characterized as a declaration in which a company must reconcile its bank
statement using data from several commercial bank accounts. In many other terms, it is the
process of matching the bank balance from a corporate firm's documents to the banking account.
It is critical to examine the balance of the cash book and bank statement over a certain time
frame if the discrepancy in amounts is significant. The primary goal of creating a bank
reconciliation statement is to detect and decrease the discrepancy between both the cash book
and the banking passbook. It will aid in the control of unlawful and illegal company operations,
and the general manager will have trustworthy banking details. After the organisation has fixed
the account, they check each activity via the leader and discover items, using this information to
determine which entries are causing the variances between the real cash book and the bank
statement (Tooley and Hooks, 2020).
It is necessary for the creation of bank reconciliation statements because without it, the
manager will still not be possible to ascertain the cause of the discrepancy and will also lack
documentation of how often times the bank transaction has occurred. It has the potential to boost
the firm's dishonest commercial operations. Organization must plan in a timely manner on an
annual basis to conquer the complete challenge. To close the deficit, the management must
provide a back reconciliation statement within a week. When they do not produce this
declaration, the organisation will face several issues. Ray Finance Limited was able to decrease
their mistakes and reconcile all of their petty cash transactions using their actual bank statement
by using reconciliations. As a result, BRS management is needed from the standpoint of
removing any differences in the quantity of both volumes, as well as guaranteeing that all papers
are full and do not represent errors in various ways. It enables a top operations to produce the
ultimate decisions possible so that organizational duties may be completed as quickly as possible
in the future (Burke, Chen, and Lobo, 2020).

QUESTION 2
Control accounts
It's a system connected to the money system that really is created with the intention of
storing a large amount of data. This paper examines the particular manipulations of
supplementary information in order to provide a liquified picture of accounts with a significant
number of acts. The most seen that papers about which modifications are performed throughout
management solutions are benefits compared and loan commitments. Because all of these papers
are, for even the most part, repository with a significant amount of accounts, it is critical to
evaluate them and use tracking accounts whilst trying to evaluate them. The amount of these
papers is reviewable in extra levels reporting account submitted to the cash revenue recognition
technique, as opposed to reporting in accounting system (Aquino and Cardoso, 2019).
Role of control accounts in financial management:
Certain investments, combined separately, represent a crucial significance in a financial
accounting corporation. Here are some other things that affect in this regard:
• The control account has the role of having the correct control percentage through which
popular cash flows can be obtained around where the revenue recognition characteristic can be
accomplished.
• The major aspect of the revenue recognition supervision process is to ensure the general ledger
away from the subject so that it will be more hard to decipher the facts and figures in the
upcoming years.
• The measurement aspires to address the issue congealed knowledge and otherwise informed
decisions in subordinates funds because once possible in understanding many of the evidence
with little judgment and to be qualitative methodology for internal controls and spending account
production (Baehaqi, Birton and Hudaefi, 2020).

QUESTION 3
Suspense Account
Such accounts are set up to keep track of shady transactions. The entire thing is being
documented on a short term basis. It is created so the ledger and journal entries did not confirm
the activity when it came. Those would be the many kinds of shaky company accounts. It is
necessary for an accounting to construct a suspense account since it will aid in the maintenance
of the ledger's balance. Even when an auditor is unsure with where money has been received, a
suspense account is formed by the company to generate suspense and meet the new entrants.
That activity was given a time slot by the corporate account before the auditor discovered their
true location, from which they could simply correspond ahead and redo their work on time. It is
helpful in determining the cause for the absence of an entry (Bartosova and et.al, 2019).
Reasons of drafting suspense account:
Suspense accounts allow transactions to be made until enough information is available to
produce a section of the correct record or papers. By filing such trades, operations may go
undocumented until a notification time ends, resulting in lower financial outcomes.
However, keep in mind that items in a pressure ledger refer to unclaimed funds. As a
result, introducing a tension history upon on financial summary with an equalization is often
seen negatively and can weaken the declaration with outside economic analysts. As a result,
extra effort should be taken to settle anticipatory account at the end of each fiscal month. These
are ruled out by scrutinising every single transaction in the record. The goal of verifying on
features is to switch the transaction to correct information as soon as possible.
Over time, clearing transactions will become more difficult, especially if there is no
information as to why the transaction was placed in the database in the first place. As a result, the
duration of possessions should be monitored and controlled.
QUESTION 4
(a) Required to prepare updated cash book and bank reconciliation statement
Updated cash book as at 28th February 2017:
Revised cash Book

Particulars Dr. Particular Cr.
Balance b/d 1760 D.Park 270
Insurance against fire 170 Mr. Akram 105
Monthly bill 56 Bank Collection 325
Arif Paid 186
Bank Charges 25 Balance c/f 1497
2197 2197
Bank reconciliation statement as on 28th February 2017:
Particular Amount
Balance as per Bank 3093
Add:
Bank Charges 25
Arif Paid 186
Monthly bill 56
Fire insurance 170

Less:
D.Park 270
Mr. Akram 105
Bank collection 325
Balance as per cash book 2830
QUESTION 5
Journal entries

Suspense account

CONCLUSION
As per the above report it has been concluded that Accountancy plays a significant part in
the operation of a corporate organisation, as seen by the preceding analysis. Without accounting,
businesses are unable to carry out their operations because they lack knowledge of profit and
loss, as well as the ability to develop policies and submit reports to the outside market.
Accounting begins with ledgers, which serve as the foundation for the preparation of other
journal, trial balance, and financial statements. With using suspense and control accounts,
financial statements and bank reconciliations are produced to reduce mistakes in the leadership's
back as well as other transactions. The management department utilises financial reports to
convey it to users and organizations, who then make decisions and evaluate the company
organisation success. Those are beneficial in resolving financial issues through the use of money
management systems.

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