Financial Accounting Report: Regulations, Clients and Analysis

This report provides a detailed overview of financial accounting, starting with an introduction to its importance in business and the preparation of financial statements. It includes a discussion of accounting regulations, principles, and concepts, emphasizing their role in producing reliable financial information. The report analyzes various client scenarios, presenting journal entries, ledger accounts, trial balances, income statements, and balance sheets. It also covers bank reconciliation statements, suspense accounts, and control accounts. Furthermore, the report outlines key accounting principles such as GAAP, economic assumptions, the principle of full disclosure, going concern principle, materiality principle, and monetary unit assumption. The report also includes the concepts of consistency and material disclosure. The report concludes by emphasizing the crucial role of accounting in providing clarity regarding business transactions and overall financial health.

Financial Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
A. Produce a report to Line Manager for discussing accounting regulations........................1
Material disclosure and consistency concepts........................................................................4
CLIENT 1........................................................................................................................................5
A. Journal entries for the sole trader......................................................................................5
B. Producing ledger accounts for business...........................................................................10
C. Preparing trial balance for firm........................................................................................18
M1. Compiling trial balance by taking purchase and sale transactions...............................19
M2. Trial balance by considering accounting rules and regulations....................................20
CLIENT 2......................................................................................................................................20
A. Income statement for the sole trader................................................................................20
B. Balance sheet for firm......................................................................................................21
CLIENT 3......................................................................................................................................22
A. Profit and Loss account for organisation.........................................................................22
B. Balance sheet for Raintree Ltd.........................................................................................23
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C. Outlining principles and concepts of accounting.............................................................28
D. Importance of measuring and presenting depreciation in financials...............................29
M2. Assessing P&L, balance sheet and cash flow statements.............................................29
D2. Accurate calculations in accounting for producing financial statements......................29
CLIENT 4......................................................................................................................................30
A. Preparation of bank reconciliation statement..................................................................30
B. Causes of recording transaction in bank reconciliation statement...................................30
C. Producing cash books......................................................................................................30
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M3. Reconciliation process and related accounting terms...................................................31
D3. Producing bank reconciliation statement.......................................................................32
CLIENT 5......................................................................................................................................32
A. Producing sales and purchase ledger account for the company......................................32
B. Explaining control account..............................................................................................33
CLIENT 6......................................................................................................................................33
A. Discussing suspense account and main features of suspense account.............................33
B. Preparation of trial balance..............................................................................................33
C. Producing journal entries.................................................................................................34
D. Distinguishing clearing and suspense account................................................................35
M4. Exploring types of accounts..........................................................................................35
D4. Providing accounting methods for organisation............................................................35
CONCLUSION..............................................................................................................................36
REFERENCES..............................................................................................................................37

INTRODUCTION
Financial accounting is crucial branch of accounting which is required for preparation of
financial statements in effective way. Present report deals with importance of accounting in the
business in order to record various transactions that occurs on day-to-day basis. The solutions for
various clients are provided by seeking information given and as a result, financials are prepared.
In accordance to this, journal entries are made, then entries are posted to general ledger accounts
in effective manner. From this, trial balance is formulated to check on errors if any that might
creep in posting entries into ledger. Finally, balance sheet and income statements are drawn.
Apart from this, bank reconciliation statement is prepared to rectify balances of bank and that
with records maintained by firm. Suspense account and control account is explained.
Furthermore, accounting regulations, principles and concepts are discussed which are provided
by various professional bodies. Thus, it can be said that accounting plays crucial role in the
business as it provides clarity regarding the transaction occurred in and classified into their
respective nature of accounts.
A. Produce a report to Line Manager for discussing accounting regulations
To: Line Manager
From: Junior Accountant
Subject: Accounting terms, regulations to be taken into account by organisation
Respected Sir,
Accounting is one of the important functions in the business so that day-to-day
transactions may be effectively recorded (Damodaran, 2016). It is essentially required because
without taking into account various transactions into account, financial statements cannot be
prepared in effectual manner. In carrying out this task, accounting principles and regulations
play a crucial role in preparing financials in the best possible manner. The financials such as
cash flow statement, balance sheet, income statement are important pillars of accounting which
is used to carry out proper financial health of the concern in effective way.
The balance sheet shows assets and liabilities of organisation for a particular period
usually one year. On the other side, cash flow statement effectively shows cash position
whether surplus or deficit exists. While, Profit and Loss account clarifies expenditures incurred
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and income earned in particular financial year. Hence, all these statements are prepared by
relying on proper accounting practices by accountant so that clear position can be highlighted
regarding health in effective manner.
Accounting principles and regulations governed by the accounting professional bodies
are important because financials cannot be formulated in effective way without abiding by rules
and principles of accounting (Nash, 2018). This helps to effectively prepare proper financials
which highlights true and fair view of financials in the best possible manner. On the other hand,
if regulations are not properly followed, then organisation is not able to produce financials in
effective way. This affects fairness of accounts and as such, it is required that such regulations
and principles should be followed for producing financials with ease. The accounting
information derived through financials is quite useful for the organisation as it imparts to the
external users of financial information for taking enhanced decisions. Creditors' are benefited as
they seek financials and attain clarity about the solvency position of company. On the other
side, investors' are benefited as they analyse profitability aspect of organisation. Moreover,
other users also seek such information and then take decisions. Hence, accounting regulations
are important part in carrying out accounting as firm is benefited by following various requisites
and thus, authentic financials are formulated in effective way.
Financial Accounting
Financial Accounting is useful as past data is used to draw effective financials. In simple
words, monetary transactions which occur on daily basis are taken into account and thus,
financials are prepared with ease. It is required so that proper statements may be formulated and
it may impart necessary information to external users quite effectually (Busco and Quattrone,
2018). This is essentially required because external users rely on financials which serves them
the required information by which they are able to take enhanced decisions.
Apart from external parties, internal management is also benefited by seeking financial
statements because they make strategies and initiates improvement for strengthening internal
operations. It is required to strengthen organisation internally so that output may be produced
more and customers' satisfaction level is enhanced in a better way.
Creditors and investors are able to take better decisions and thus, financial accounting is
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the main element in producing authenticated financials of organisation highlighting health in
terms of financial performance. Moreover, profitability, efficiency, solvency and liquidity
aspects of firm are effectively attained which is possible by preparing financial statements by
information provided by such accounting. In relation to this, monetary transactions such
recording in books of prime entry and posting them into ledger and then constructing trial
balance are bases for effectively producing balance sheet, income and cash flow statements
(Constable and Kuasirikun, 2018). In addressing this, taxation authorities are benefited by
seeking financials as it serves them to effectively ascertain tax liability of organisation in the
best possible manner. Thus, it can be said that financial accounting gives clarity regarding
overall position of firm quite effectually.
Regulations of Financial Accounting
The financials are produced in order to gain useful insight with regards to overall
position of company in effective manner. In relation to this, for preparing adequate and
authenticated statements, it is required that accounting regulations must be properly followed by
the organisation so that reliability and transparency may not get diminished. This helps to
produce effective and better statements by relying on various accounting regulations imparted
by professional bodies entrusted to provide guidelines to accountants so that reliable financials
may be prepared in effective way.
In addressing this, financial statements may be manipulated by company which affects
reliability and as such, imparts wrong information to users. It adversely affects them as when
they rely on manipulated statements, decision-making is hampered badly. False information is
provided to them impacting on external parties up to a high extent (Heitzman and Huang,
2018). This should be alleviated in order to produce reliable financials and thus, financial
regulator of UK has given FRC guidelines which have to be effectively followed by
organisation and government also for preparing authenticated financials. The legal frameworks
are listed under-
FRC (Financial Reporting Council)- The body is entitled to foster development in the nation
and regulates organisations and government units as well. Hence, accounting practices are
adopted by accountants quite effectually.
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IASB (International Accounting Standards Board)- This body is entrusted to provide
guidelines to the company's accountant by which reliable and fair financials may be prepared.
This helps to effectively prepare statements and no false information is indulged in.
IFRS (International Financial Reporting Standards)- The accounting body also imparts
guidelines to the accountants in order to abide by legal framework so that adequate financials
may be formulated in the best possible manner.
Rules for accounting
GAAP (Generally Accepted Accounting Principles) which is another important body
has imparted guidelines for preparing financials in effective manner. The several principles and
rules are described below-
Economic assumption- This accounting rule postulates that organisation analyses economic
environment and as such, assumptions are made accordingly (Libby, 2017). In additional to
this, assumptions are made to estimate how economic environment will impact upon sales and
forthcoming project.
Principle of full disclosure- It states that firm should prepare financials by taking into account
all the monetary transactions. In simple words, to produce reliability, it is needed to compile
financials in single statements so that more transparency may be imparted in a better way.
Going concern principle- The accounting principle states that financial statements are produced
by taking into consideration this principle. It means that firm carries on business for long run
and will not shut down immediately. Observing this, financials are prepared.
Materiality principle- This principle postulates that only material information should be taken
into account which do not affect decision-making by external users. Hence, immaterial items
must be ignored. This is required so that material items are taken into account for producing
financials (Nitzl, 2018).
Monetary unit assumption- The principle is related to monetary value of currencies. The US
Dollar is universally applicable and accepted currency which can be used by organisation in
order to made business transactions in effective manner.
Material disclosure and consistency concepts
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Concept of consistency- The accounting concept states that firm should take into account only
that accounting policies which it has used in previous year. In simple words, consistent methods
should be followed in order to produce reliability in the best possible manner. It can be said that
if consistent accounting methods are not taken into then transparency and reliability of
organisation is hampered. Hence, it is required to follow same policies. For instance, if straight
line method is followed by the organisation, then should be followed in forthcoming years in
order to produce reliable information.
Material disclosure- The concept states that material information should be taken into account
which affects financial statements up to a high extent. In other words, immaterial items or
information should be ignored which do not have impact on users of accounting information
and thus, reliability can be ascertained in a better way. The books of accounts should disclose
only material items which is effectively evaluated by external stakeholders and they are able to
take decisions in the best possible manner.
CLIENT 1
A. Journal entries for the sole trader
The transactions are to be recorded in a better way so that receipts and withdrawals may
be effectively ascertained (Schneider, 2018). For recording transactions, books of prime entry
also known as journal is made in the best possible manner. It can be said that for producing
financials, journal entries is the first step which is done by recording business transaction in
chronological order. This is made in chronological order so that every transaction occurred on a
particular date should be recorded on that date only for the purpose of reliability. Hence, entries
are posted in journal so that each and every transaction may be recorded and accounted for quite
effectually. The journal entries are produced for Alexandra firm below-
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