Financial Accounting Report: Scenario Analysis and Term Clarification

This financial accounting report provides a detailed analysis of financial transactions and the preparation of financial statements. The report begins with an introduction to financial accounting and its significance, followed by two scenarios demonstrating the recording of transactions through journal entries, ledger accounts, and trial balances. Scenario 1 includes the creation of journal entries, ledger accounts, and a trial balance, while Scenario 2 presents a profit and loss account and balance sheet. The report also includes explanations of key accounting terms such as standing orders, direct debits, dishonored checks, and bank charges. The report showcases the processes involved in financial accounting, including the preparation of financial statements and bank reconciliation, which aid businesses in decision-making. The content covers various aspects of financial accounting, providing a clear understanding of how financial transactions are recorded, classified, summarized, and presented in financial reports.

FINANCIAL
ACCOUNTING

Table of Contents
INTRODUCTION
..........................................................................................................................................................3
Scenario 1.........................................................................................................................................3
Scenario 2.........................................................................................................................................7
(a) difference between various terms...........................................................................................8
CONCLUSION..............................................................................................................................13

INTRODUCTION
Financial accounting is considered to be the most special branch of the accounting which focuses
on keeping the track of the company's financial transactions. In this financial accounting
transactions made by the company are first recorded, classified, summarized and presented in the
financial reports or the financial statements. Financial statements such as the income statements
and balance sheet in order to help its users by ascertaining them with the useful information
which ultimately aids them in decision-making.
Duncan and Toplis is an accounting service provider company and company owning 11
offices and a UK based company and it is considered to be the one of the firm of charted
accountants and having strong focus on SME's. The core business of the company is to provide
the expertise of the certifies auditors, tax advisers and accountants which includes Bookkeeping,
VAT, tax returnes, etc..
The present study is based on financial accountant which includes recording of transaction
that is preparation of the journal entries, ledger accounts, trial balance. In addition to this the
report will also include preparation of the financial statements which includes income statements
and balance sheet and also the bank reconciliation statements which helps the business s and its
users in decision-making.
The clarification of different terms which includes standing order, Direct debit, dishonour of
cheque and bank charges will also explain briefly in the report.
Scenario 1
JOURNAL ENTRIES
Date Particulars Debit(£) Credit()
1 June 2016 Cash A/c Dr. 65,000.00
To Capital A/c 65,000.00
2 June 2016 Purchase A/c Dr. 8,000.00
To Creditors A/c 8,000.00
07 June 2016 Cash A/c Dr. 4,000.00
To sales A/c 4,000.00
08 June 2016 Creditors A/c Dr. 4,000.00

To Bank A/c 4,000.00
14 June 2016 Insurance A/c Dr. 75.00
To Bank A/c 75.00
15 June 2016 Debtors A/c Dr. 12,000.00
To sales A/c 12,000.00
16 June 2016 Purchase A/c Dr. 10,000.00
To Creditors A/c 10,000.00
18 June 2016
Computer equipment
A/c Dr. 3,000.00
To Cash A/c 3,000.00
20 June 2016 Rent A/c Dr. 150.00
To Bank A/c 150.00
21 June 2016 Cash A/c Dr. 10,000.00
To sales A/c 10,000.00
25 June 2016 Cash A/c Dr. 100.00
To Petty Cash A/c 100.00
30 June 2016 Stationary A/c Dr. 30.00
To Petty Cash A/c 30.00
Ledger A/c
Dr. Cash A/c Cr.
Date Particulars Amount Date Particulars Amount
01/06/16 To Capital A/c £65,000.00 18/06/16
By Computer
Equipment A/c £3,000.00
07/06/16 To sales A/c £4,000.00
21/06/16 To sales A/c £10,000.00
25/06/16
To Petty Cash
A/c £100.00
30/06/16 By balance c/d £76,100.00
£79,100.00 £79,100.00

Capital account
Dr. Cr.
Date Particulars Amount Date Particulars Amount
01/06/16 By cash A/c £65,000.00
30/06/16 To Balance c/d £65,000.00
£65,000.00 £65,000.00
Purchase A/c
Dr. Cr.
Date Particulars Amount Date Particulars Amount
02/06/16
To Creditors
A/c £8,000.00
16/06/16
To Creditors
A/c £10,000.00
30/06/16 By balance c/d £18,000.00
£18,000.00 £18,000.00
Creditors A/c
Dr. Cr.
Date Particulars Amount Date Particulars Amount
08/06/16 To Bank A/c £4,000.00 02/06/16
By Purchase
A/c £8,000.00
16/06/16
By Purchase
A/c £10,000.00
30/06/16 To Balance c/d £14,000.00
£18,000.00 £18,000.00

Sales A/c
Dr. Cr.
Date Particulars Amount Date Particulars Amount
07/06/16 By cash A/c £4,000.00
15/06/16
By Debtors
A/c £12,000.00
21/06/16 By cash A/c £10,000.00
30/06/16 To Balance c/d £26,000.00
£26,000.00 £26,000.00
Bank A/c
Dr. Cr.
Date Particulars Amount Date Particulars Amount
8 June 2016
By Creditors
A/c £4,000.00
14 June 2016
By Insurance
A/c £75.00
20 June 2016 By Rent A/c £150.00
30 June 2016 To Balance c/d £4,225.00
£4,225.00 £4,225.00
Insurance A/c
Dr. Cr.
Date Particulars Amount Date Particulars Amount
14 June 2016 To Bank A/c £75.00
30 June 2016 By balance c/d £75.00
£75.00 £75.00

Debtors A/c
Dr. Cr.
Date Particulars Amount Date Particulars Amount
15 June 2016 To sales A/c £12,000.00
30 June 2016 By balance c/d £12,000.00
£12,000.00 £12,000.00
Computer equipment A/c
Dr. Cr.
Date Particulars Amount Date Particulars Amount
18 June 2016 To Cash A/c £3,000.00
30 June 2016 By balance c/d £3,000.00
£3,000.00 £3,000.00
Rent A/c
Dr. Cr.
Date Particulars Amount Date Particulars Amount
20 June 2016 To Bank A/c £150.00
30 June 2016 By balance c/d £150.00
£150.00 £150.00
Petty Cash A/c
Dr. Cr.
Date Particulars Amount Date Particulars Amount
25 June 2016 By cash A/c £100.00
30 June 2016
By Stationary
A/c £30.00
30 June 2016 To Balance c/d £130.00

£130.00 £130.00
Trial Balance for the Year ended 2016
Amount(£) Amount(£)
Particulars Debit Credit
Cash in hand 76100
capital 65000
purchase 18000
creditors 14000
sales 26000
Bank 4225
Insurance 75
Debtors 12000
Computer equipment 3000
Rent 150
Petty cash 130
Suspense account 230
109455 109455
Scenario 2
Carol Andrew:
Profit and loss account for the year ended 2017
Particulars Amount (£) Total
Sales 125000
Other income:
Interest received 1000
Rent received 4850 130850

Less: Cost of goods sold 82000
Gross profit 48850
Less: Operating expenses-
Wages & salaries 13200
Rent and rates 1500
postage 900
Depreciation 5000
Bad debts 1200
Insurance 7500
Net profit 19550
Cost of goods sold=Opening inventory+ purchases- closing inventory.
Balance sheet For the year ended 2017
Particulars Amount (£) Total
Liabilities
Capital 120800
Less: Drawings 5150
Add: Profits 19550 135200
Current liabilities
creditors 3900
Accumulated Depreciation 5400
Outstanding 340
Rent received in Advance 490
Provision for Bad Debts : 284
Provision 934
Less: Bad debts written off 650 10414
Total liabilities 145614

Assets
Non-current assets
Fixed assets:
Motor van 25000
Less: depreciation 5000
Net 20000
Loan 100000 120000
Current assets
Debtors 12500
Less:bad debts 1200
Net Debtors 11300
Prepaid Insurance 411
Other current assets 1969
Closing stock 1000
Cash in hand 340
Bank 10594 23645
Total assets 145614
(a) difference between various terms
Direct Debit and standing order
Standing order is considered to the regular payment which can set up to pay the people
and organization and transferred to the other bank accounts. Standing order can amended and
canceled when required (Christensen,Nikolaev and Wittenberg‐Moerman, 2016.). Direct debit
could only be set up by the organization to which the payment is made.
Standing order is set up by the customer through using app of banking, internet banking or
in any branch. The standing order is generally used to move and transfer money regularly
between the accounts or can be sent to another one's account on continuous and regular basis (De
Waegenaere,Sansing and Wielhouwer, 2015). Standing order is the order which can be altered or
canceled at any point of time by the customer.

This is considered to the instruction which is given by the customers to their banks in
order to pay fixed sum of money at regular intervals and it can be weekly, quarterly , monthly or
may yearly(Demerjian, 2017. ). These are generally set by the customers.
A direct debit is set up the company, using the sort code and the account number and is
often used to pay to the energy providers, credit card bills and the council tax bills (Francis and
et.al.,2015.). Direct debit is considered to be the part of the fixed agreement and could only be
changed with the help of company by collecting the direct debit.
Direct debit emphasis on collection authority for money by the customer to collect the
money directly from their bank account as and when the payment is due. Direct debited payments
could vary in frequency and amount (Henderson and et.al., 2015). This can only be set up by the
organization to which the payment is being made by the customers. In this customer make sure
that their all the dues and bills need to paid automatically.
Standing order Direct debit
In this customer controls all the set up and
there is no need of any provider (AKieso,
Weygandt and Warfield, 2016)
In this provider is needed that is their is
requirement of banker.
Customer can incur small charge from bank for
each payment.
Charge is depended on the provider
There is no involvement of notifications as it
might take more than a month to ascertain the
failures in order to enhance customer from
another payment (Lafond, McAleer and
Wentzel, 2016)
Automatic notifications is involved in this as
customers are notified and informed
automatically s and when failures incurred and
able to re submission of the payment when
customers want ( Maskell, Baggaley and
Grasso, 2016.).
Once the payments are made there is no
customer protection.
On the case of wrong payments immediate
refunds are generally made (De
Waegenaere,Sansing and Wielhouwer, 2015).

Standing order are generally considered to be the great for small organizations as if there
is less than 25 customers than standing order is considered to be good and in case if there is more
than 25 customers than direct debit is more preferable (Pratt, 2016). As in standing order there is
need to check the bank account of the customer when the payments are due in order to find that
actually the payment is made pr not because some time payments fails to settle.
Whereas direct debit are made by the banks, so they know all the information that
payment is made or not (Maskell, Baggaley and Grasso, 2016.). In case if failure of payment
made than the notification is sent to the customers.
Bank charges
The term bank charges depicts that it covers all the charges and the fess which is made by
the bank to the customers that is all the payments and fees which is charged by the bank from
their customers(Libby, 2017). Charge can also be related with the personal account charge of the
customer that in their current account and checking account. Provision are charged on the
accounts monthly can also be considered as the part of the charges, interest in overdrafts, charges
on exceeding the overdraft limits. Bank charges is considered to be the amount of money which is
paid by the customers for the bank services they received in order to satisfy their needs and
wants( Macve, 2015.).
Dis-Hon our cheque
It is also known as return or bouncing in language of banks. Dishonored cheques are also
called as the bouncing cheque and returned cheques. These are the cheque which are returned by
the banker for some following reasons which includes:
Insufficient availability of funds in the customer's account which means there is no enough fund
available in the account of the customers through which payment of cheque can be made.
Whenever in the situation when bank refuses to make the payments on cheque than
cheque falls in the category of the dishonored cheque (Narayanaswamy, 2017). The cheque is
returned by the bank to payee with attached memo in which reason is disclosed for the dishonor
of the cheque.
The situation where bank completely refuses to pay the certain amount in cheque than this
is said to be the dishonored of cheque there are many reasons for the cheque dishonor which must
be classified as ;
 Overwriting in cheque

 No signature on the cheque or the signature is not matching with the specimen signature
which is kept by the bank (Francis and et.al.,2015.).
 Name of the payee us not clearly mentioned
 Amount written on the cheque does not match the words written
 Account number is not clearly mentioned (Henderson and et.al., 2015)
 in case of drawer given order to the bank to stop t payment on the cheque
 court has given order to bank to stop the payments on cheque
 Before presentation of the cheque, drawer has closed his account and fund is not
sufficient in bank account to meet the obligation of the payment(Hoyle, Schaefer and
Doupnik, 2015).
 Of bank finds information in context with the death of insolvency of drawer.
 Any alterations who is made on the cheque is not proved by drawer
 Date is not written and mentioned clearly on the cheque(Macve, 2015.)
This all can be reasons for the cheque dishonor or there are many other reasons also which are
considered to be the reason for the dishonor of cheque.
,,
Milky:
Journal entries for rectification of errors
Right
entry Debit( £) Credit(£)
Wrong
entry Debit (£) Credit(£)
Rectified
entry Debit(£) Credit(£)
Purchase
A/c Dr. £2,000.00
Purchase
A/c Dr. £2,000.00
To Musa
A/c £2,000.00
Entry
omitted
To Musa
A/c £2,000.00
Van A/c
Dr. £670.00
Van A/c
Dr. £670.00
Cash A/c
Dr. £1,340.00
To bank
a/c £670.00
To Cash
A/c £1,340.00
To Bank
a/c £670.00
G Tahir £650.00 Not G Tahir £650.00

A/c Dr.
entered in
G Tahir
A/c A/c Dr.
To Sales
A/c £650.00
To sales
A/c £650.00
To
Suspense
A/c £650.00
Electricity
bill A/c
Dr. £790.00
Suspense
A/c Dr. £790.00
Electricit
y bill A/c
Dr. £790.00
To cash
A/c £790.00
To Cash
A/c £790.00
To
Suspense
A/c £790.00
Motor
vehicle
Expense
A/c Dr. £500.00
Motor
Vehicle
A/c Dr. £500.00
Motor
vehicle
Expense
A/c Dr. £500.00
To cash
A/c £500.00
To Cash
A/c £500.00
To Motor
Vehicle
A/c £500.00
Sales
Balance £1,030.00
Sales
Balance £1,300.00
Sales A/c
Dr. £270.00
To
Suspense
A/c £270.00
L
Samantha
A/c Dr. £190.00
Discount
Allowed
A/c Dr. £190.00
L
Samantha
A/c Dr. £190.00

To
Discount
Received
A/c £190.00
To L
Samantha
A/c £190.00
Suspense
A/c Dr. £190.00
To
Discount
received
A/c £190.00
To
Discount
Allowed
A/c £190.00
Bank A/c
Dr. £384.00
Sales A/c
Dr. £384.00
Bank A/c
Dr. £384.00
To D
Jones A/c £384.00
To
suspense
A/c £384.00
To sales
A/c £384.00
Suspense account is considered to the account in the general ledger which is used
temporarily to store and record the transaction sin which requires further analysis before any
permanent assigning in the records can made (Christensen, Nikolaev and Wittenberg‐Moerman,
2016.). This suspense account allow some time to accountant to make research for the entire of
the transaction which is recording in the company's book and need to transfer it into the
respective nature of accounts. This acts as the holding account till than the error has discovered or
any transaction which is unknown is not identified (Demerjian, 2017). To hold the discrepancies
of control accounts, suspense accounts can be open while working with the trial balance in order
to match the balance for efficient and effective results to the users of the financial information
and the financial reports (Maynard, 2017).
Suspense account
DR CR

Particulars Amount Particulars Amount
By G Tahir a/c 650
By Electricity bill a/c 790
by sales a/c 270
To baalnce c/d 1710
1710 1710
CONCLUSION
From the above report it can be concluded that there are different factors which
accountant need to perform while doing financial accounting in the organization. This includes
preparation of the journal entries by recording the transaction classifying it into the ledger
accounts, and also the preparation of the trial balance in order to find any difference s and to open
a suspense account.
The report also concludes the preparation of the final accounts which is the combination
of the income statement and the balance sheet. The explanation of the different terms which
includes direct debit, dishonor of cheque, bank charges and standing order is also explained in the
above report for effective understanding of the different terms used in the bank reconciliation
statement.