Financial Accounting Report: Principles, Conventions, and Clients

This financial accounting report, prepared for RBS Accountants Ltd., delves into the core principles and practices of financial accounting. It covers key areas such as accounting rules and principles, including the three golden rules, money measurement, matching, cost, dual aspect, and business entity principles. The report also addresses accounting conventions like consistency and material disclosure, crucial for accurate financial reporting. The report then applies these concepts through detailed examples from multiple clients, including journal entries, ledger accounts, trial balances, profit and loss statements, balance sheets, and bank reconciliation statements. It explores depreciation methods and the use of suspense accounts. The report aims to provide a comprehensive understanding of how financial accounting principles are applied in real-world business scenarios, ensuring corporations adhere to accounting regulations and provide accurate financial information.

Financial Accounting
Principles

Table of Contents
INTRODUCTION...........................................................................................................................1
1. Financial accounting and its purposes ....................................................................................1
2. Regulation of financial accounting..........................................................................................2
3 . Accounting principles & rules : .............................................................................................2
4. Conventions related to consistency and material disclosure...................................................3
CLIENT 1........................................................................................................................................4
(a) Journal Entry in the books of David Study...........................................................................4
(b) Ledger Accounts....................................................................................................................6
(c) Trial Balance as at 31st January, 2018................................................................................13
CLIENT 2......................................................................................................................................14
(a) Statement of profit and loss for Peter Hampau for the year ended 31st July 2018 .............14
(b) Statement of financial position for Peter Hampau as at ended 31st July 2018 ...................15
CLIENT 3......................................................................................................................................15
(a) Profit and loss account of Bowling Limited.........................................................................15
(b) Balance Sheet of Bowling Limited......................................................................................16
(c) Accounts concepts such as consistency and prudency.........................................................17
(d) Depreciation and its methods..............................................................................................17
Client 4...........................................................................................................................................17
(i) Purpose of bank reconciliation statement ............................................................................17
(ii) Prepare Durrell Ltd's updated cash book for December 2017.............................................18
(iii) Bank Reconciliation Statement as at 31"t December 2017................................................19
CLIENT 5......................................................................................................................................19
(a) Books of Henderson.............................................................................................................19
(b). Control account...................................................................................................................20
CLIENT 6......................................................................................................................................20
A. Suspense Account.................................................................................................................20
B. Drafting of Trial Balance......................................................................................................21
C. Journal entry for suspense account........................................................................................21
D . Difference between clearing account and suspense account ..............................................21

CONCLUSION..............................................................................................................................22
REFERENCES..............................................................................................................................23

INTRODUCTION
Financial accounting is the field of accounting concerned with the analysis, summary and
recording the financial transactions pertaining to a business. It provides help to organisations for
preparation of financial statements appropriately and reflects the financial position of company.
There are various regulations and rules which are needed to be follow by the corporation. In this
report chosen company is RBS Accountants Ltd. which is incorporated in London, UK. The aim
of this report is to ensure that corporations follows the compliances and regulations of
accounting. There are following topics which are discussed in this report such as: accounting
rules and principles, conventions & concepts related to consistency and material disclosure,
business transactions using double entry book- keeping and trial balance, final accounts for sole
trader, partnerships & limited companies and bank reconciliation statement. Apart from this it
also discusses about recorded transactions from the suspense accounts to the right accounts.
1. Financial accounting and its purposes
It refers to the process of recording, analysing, summarizing and interpreting the
business transactions over a stipulated period of time. It is useful for supplier, creditors, investors
and other stakeholders which are directly or indirectly related to the organisation. Junior
accountant of RBS Accountants Ltd. is responsible to prepare financial reports as per the
regulations and rules of accounting as a result it will able to provide accurate data and
information which help the corporation to take important business decisions. It includes cash
flow statement, income statement and balance sheet. Cash flow statement is being prepared so
that company can know the inflow and outflow of cash through various activities such as:
operating, investing and financing activity. Income statement is being prepared so that
organisation can know its profitability level for a stipulated period of time. Balance sheet is
being prepared so that RBS Accountants Ltd. can know their total liabilities and assets of its
business. There are various purposes to financial accounting which are discussed as below:
 Purpose of financial accounting is to give relevant information about financial position of
corporation (Agasist and Catalano, 2013).
 To provide useful data and information to the stakeholders of company so that they can
take important decisions about the investment.
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 It provide help the corporation to take important decisions such as: expansion, investment
etc. (Barth, 2015).
2. Regulation of financial accounting
To follow the regulations of financial accounting is necessary for an organisation so that
financial statements can be prepare in effective manner and chances of errors can be avoided.
Junior accountant of RBS Accountants Ltd. is responsible to follow the regulations of financial
accounting. Regulations of financial accounting are described as below:
 International financial reporting standards contains various compliances and principles
which provides help to prepare financial statements such as: cash flow statement, income
statement and balance sheet. Junior accountant of RBS Accountants Ltd. has follow the
principles of IFRS while preparing the financial reports. International Accounting
Standard Board has issued the IFRS rules which provide the regulations to accountant
that how they have to maintain the accounts.
 International accounting standards has been issued by International Accounting Standard
Board. It is globally accepted accounting principle.
 According to the Companies Act 2006, it is the responsibility of accountant to follow the
compliances of this act and prepare accounts as per the regulations of it (Alver and
Talpas, 2013).
3. Accounting principles & rules:
There are different rules and principles which are needed to be follow by the firms while
preparation of financial report. It provides help to the junior accountant of RBS Accountants Ltd.
to make financial statement are per the rules of accounting. Rules of accounting are discussed as
below:
Types of account Rules of accounting
Nominal account Credit, the gain or income of the business
Debit, the expenditures or losses of business
Real account Credit what goes out from the business
Debit what comes into the business
Personal account Credit the giver
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Debit the receiver
So, these are the three golden rules of accounting which are needed to be follow by the
Junior accountant of RBS Accountants Ltd. while preparing books of accounts of company
(Collins and Riley, 2012). As a result, true and relevant information and data can be generated
which is helpful for the organisation to take important decisions related to business growth.
Money measurement principle: This concept is based upon the value of money and as
per this principle only those transactions can be recorded which can be expressed in the terms on
money. Junior accountant of RBS Accountants Ltd. has follow this concept while recorded the
items for preparation of financial report.
Matching principle: As per this principle, all revenue and expenditures of business
should match which are generated in same accounting period.
Cost principle: According to this principle, amount of an assets should be recorded at
acquiring value means value at which they have purchased by the owner of organisation.
Dual aspect principle: As per this principle an organisation should record the transactions
of business in both side which are debit side and credit as well as credit side in account. Junior
accountant of RBS Accountants Ltd. can follow this principle while recorded the items
(DRURY, 2013).
Business entity principle: As per this principle, business and its owner are not same
persons means they are separate persons from each other. An individual can sue and it can be
sued as well as corporation can be sue or can be sued.
4. Conventions related to consistency and material disclosure
Conventions are the guidelines which are from the practical applications of principle of
accounting. It is mandatory to follow these guidelines besides it is a generally accepted
convention which is based upon the customs. There are various accounting conventions which
are as:
Convention of consistency: To compare the data of previous year, it is important so that
organisation can know growth of its business in current year. With the help of accounting
policies and rules similar transactions which are followed consistently and continuously. For an
example, if corporation has follow market price or cost method for valuation of inventory and
written down method has followed for depreciation of fixed assets so it is required for the
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organisation to follow these methods continuously and consistently. It provides help to make
comparison more convenient (Edwards, 2013).
Convention of material disclosure: According to this method it is necessary for an
organisation to disclose all facts and figures which are related to the business of company. As a
result, accurate and relevant information and data can be presented to the public or reader who
reads the financial statement of corporation. It helps to provide required information to the
stakeholders of organisation and on the basis of this data they can take investment decisions.
CLIENT 1
(a) Journal Entry in the books of David Study
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/ Storage cost A/c Dr. 800
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18
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
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(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)
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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 31/07/1
8
By Profit & Loss A/c 800
Total 800 Total 800
7

Sales A/c
Date Particulars Amount Date Particulars Amount
31/01/
18
To Trading and P&L
A/c
14810 03/01/1
8
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
09/01/1
8
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 01/01/1
8
By Opening Balance
(B/f)
10150
To Bank A/c 2600 02/01/1
8
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 02/01/1
8
By purchases A/c 1060
Total 1060 Total 1060
8

J Wilson A/c
Date Particulars Amount Date Particulars Amount
03/01/
18
To Sales A/c 2020 11/01/1
8
By Sales Return A/c 370
16/01/1
8
By Bank A/c 880
By Discount Allowed
A/c
83
31/01/1
8
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 11/01/1
8
By Sales Return A/c 310
16/01/1
8
By Bank A/c 1470
By Discount Allowed
A/c
104
31/01/1
8
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 31/01/1
8
By Closing Balance c/d 2820
Total 2820 Total 2820
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