Financial Accounting Report: Principles, Regulations, and Analysis

This report provides a comprehensive overview of financial accounting principles, regulations, and their practical application through six client case studies. It begins with an introduction to financial accounting and its purpose, followed by an examination of relevant regulations and accounting rules, including the double-entry system, trial balances, and financial statements like the statement of profit and loss. The report delves into accounting principles such as going concern, separate entity, and revenue recognition, alongside conventions like consistency and material disclosure. Client-specific sections illustrate the application of these concepts, covering topics such as depreciation, bank reconciliation, and control accounts. The report concludes with a summary of key concepts and a list of references.

FINANCIAL
ACCOUNTING
PRINCIPLES

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Financial Accounting..................................................................................................................3
Regulation relating to financial accounting................................................................................3
Accounting Rules and principles................................................................................................4
Conventions and concepts relating to consistency and material disclosure................................6
CLIENT 1........................................................................................................................................6
Double entry system....................................................................................................................6
Trial balance................................................................................................................................6
CLIENT 2........................................................................................................................................7
Statement of profit and loss.........................................................................................................7
Financial statement......................................................................................................................7
CLIENT 3........................................................................................................................................7
Consistency.................................................................................................................................7
Prudency......................................................................................................................................7
Purpose of depreciation...............................................................................................................7
Method of calculating depreciation.............................................................................................8
CLIENT 4........................................................................................................................................8
Bank Reconciliation Statement...................................................................................................8
Explain areas of to record bank records......................................................................................8
CLIENT 5........................................................................................................................................8
Sales ledger control account........................................................................................................8
Purchase ledger control account..................................................................................................8
Need to prepare control accounts................................................................................................9
CLIENT 6........................................................................................................................................9
Suspense account........................................................................................................................9
Differentiate between a suspense account and a clearing account..............................................9
CONCLUSION................................................................................................................................9
REFERENCERS ...........................................................................................................................10

INTRODUCTION
Financial accounting is the division of accounting that are direction on giving external
users with helpful information. It is a way to providing financial information with the help of
report of business activity (Christensen and Nikolaev, 2013). These reports are providing to
investors, creditors and other people are related to out side of the business. When prepare of
these reports that time using principles of accounting that are shows reports in effective way.
In this report covers prepare report on financial accounting, regulations, rules and
principles, conventions and concepts of consistency and material disclosure. These report
prepare to according six clients that are wants to different requirement.
MAIN BODY
Financial Accounting
It is the procedure of recording, sum-up and reporting the uncounted of transactions
resulting from business operations over a period of time. These transactions are are recorded and
shows that in financial statement are prepare of the company. In the financial statement are
including profit and loss account, cash flow statement and balance sheet. It is recording the
performance of the company in a specified period. It is include all system that are supervisor and
control of money as it flows out of an organization as an assets and liabilities, income and
expenses.
Regulation relating to financial accounting
Regulation means it is a set of rules that is planned to regulate conduct and control by the
authority. According to definition regulations are related to financial accounting as a rules that
are formulated by independent authoritative body to govern the preparation of financial
statements which are related to accounting standards. The regulation of financial accounting are
divided in to two parts first one is international and second is domestic (Collins, Pasewark, and
Riley, 2012).
In domestic regulation was largely absent in Ireland and the UK prior to the 1970s. The
institute of charted accountant
The international accounting standards committee (IASC) was established in 1973. It is
issued by the accounting standards that are calling to international accounting standards (IAS).

Accounting Rules and principles
The accounting system based on double entry system related to debit and credit. It is very
useful but in the reality its not perfectly to maintain. For maintain this system need to three
golden rules of accounting help to identify particular item. They are as follows -
Debit the receiver, credit the giver
This principle relating to the personal accounts. If a person giving something to any other
organization so that time who is receiving like organization is recorded that transaction as a debit
section but that person who is giving that is recorded as the credit section in the books of
accounts.
Debit what comes in and credit what goes out
This types principles are applied on real accounts, in this accounts are including land and
building and land. All of these accounts already have debit balance by default so when getting
any property that are increasing amount in debit balance but when sale out of property that
amounts shows in credit section (Edwards, 2013).
Debit all expenses and losses, credit all incomes and gains
It is applied on nominal account and in this account presents as a question. These types of
accounts have credit balance by default. When all the incomes and gains are acquired by the
company so it will increase in relating account as a credit balance. But when all expenses and
losses are bear by the company on particular amount that time decreases and shows in debit side.
Example of nominal account is Capital account.
Accounting principles – It is a general concepts and rules are applied on accounting to recoded
transactions of any companies. These principles “generally accepted accounting principle”
(GAAP) are included of principles, are the following as -1. Going concern principle – This accounting concept based on that business will continue
going on for long time period. So depreciation are calculation based on this principle
because the business will not to functioning and pay off for its assets at flaming sale
value.2. Separate entity concept – It is describe that entity of the business and individual are kept
separate. The transactions also keep separate related to entities and in this including
assets and liabilities.

3. Money measurement – This concepts describes that when transactions are measured in
money so recorded in financial statements but when not measures so they did not
recorded like as services and other things.4. Dual concept – It is main concept that are adopted by the all companies according to the
when any transaction happen in the organisation that time effected to both accounts.5. Revenue recognition principle – In this concept are revenues are recognise when
transactions are completed in gardening process.6. Reliability principle – In this principle transaction are recorded when they are actually
occur. For example when selling to goods of any organisation that time prepare of
invoice so the is proof to recoding of the transaction (Glover, 2014).7. Matching concept – It is telling that when recorded revenues related transactions in
financial statement that time also recoded expenses at the same time. The inventors was
charge according to cost of goods sold. But not including cash related accounting in this
principle.8. Full disclosure principle – According to this concept business will be disclose of
financial statements and accounting statements are impact to rears mentality. These
statements are providing to investors, creditors and other persons need to be know about
that. It is also depended to types of companies.9. Consistency principle – This concept says all enterprises not apply same principle so
they are applying different Principe. And company adopted a particular principle so it
will going to continue to future while not getting new principle to company.10. Conservatism principle – This concept says that when identify expenses and liabilities
are recoded as soon as possible. In opposite when identify revenues and profit that are
recorded when sure about them. It may be effected to financial statement but revenue and
assets recognise and encourage for future (Profit and Loss account. 2018).11. Cost principle – According to this concept recorded cost of each transaction like as assets
and liabilities and equity investments. These items are recorded related to accounts and
on the purchase cost. In this assets and liabilities are asset according to fair value.12. Accrual principle – In this concept those transactions are recorded are actually occur in
related to financial year. It is important to cash flow are associated to them. In this
concept transactions are recorded on accrual basis.

13. Materiality concept – this concept described that in the financial statement recorded that
transaction are not happen but sure to occur in future so included that because when
shows to public these statement so it will effect in positive way.
Conventions and concepts relating to consistency and material disclosure
The convention of consistency describes that accounting practices should showing that
amount are not charging from one to another period. According to concepts are in business
consistency will be continue to operate business activities. For example depreciation are charged
on fixed assets with the particular method.
It is a one of the most significant convection that are related to materiality. This terms
applies only when provide sufficient information because in this not fully material details giving
to any one. In this recorded those items that are internally bearing and insignificant are ignored
by the company (Hatfield, 2014). It is matter relating to judgement and on the basis this taking
decision.
CLIENT 1
Double entry system
The system of double entry are relating to accounting that means every business
transaction every transaction that are related to business effect to both sides. These both sides
means both accounts that are created regarding to transaction. For example when an enterprises
taking loan from bank, so effects shows in the company's cash accounts and accounts or payable.
Both accounts are effected as cash account is increases and coming head in asset side and
accounts payable that are coming to liability side is also increases (Purchase ledger control
account. 2018). This systems helps to create balance in shows by accounting equation is -
Assets = Liabilities + Owner's equity
Double entry system recoding the transactions according to debit item and credit item. When
record a debit entry in one account that time also effected to another account that are related to
credit entry. It means that the total of all debit accounts equivalent to total of credit accounts.
This method of accounting and book keeping carry out accurate result and provide description of
financial statements. Hence, it helping to detecting error when prepare financial statements.

Trial balance
It is a accounting report that are prepare list of all accounts balance that are related to
particular organization. If accounts have not balance so it will be omitted. Trial balance divided
in two parts first one is debit balance and second one credit balance. This accounts and amounts
are related to debit that are record in debit head and opposite to those are related to credit that are
record as credit balance. In the end calculated total of both heads, that are identical (Horngren,
and et. al., 2012).
It is extremity system of trial balance that are prepared by the accountant in order to
shows whether including some maths and posting errors. In the present time coming accounting
software that are reduce these errors. So these software are decrease values of trial balance since
it is mostly calculating the sum of debit and credit columns are equal or not.

Trial Balance in the books of Alexandra fro the 01 may 2017 (Figures in £)

CLIENT 2
Statement of profit and loss
This account prepare for know to expenses and revenues of the company. On the basis of
this company knows gross profit and net profit of the company. As a result of the net profit helps
to company to taking decision regarding to them.
Financial statement
It is prepare to know financial situation of the company and it is prepare in the end of
financial year. In the financial statement are including balance sheet that are showing actual
position of the company and also prepare profit and loss account that are showing net profit an

gross profit of the company (Zeff, 2016). These statements are helping to taking appropriate
decision.
Peter Piper
Statement of Profit or Loss for the year ended 31st December 2017
£ £ £
Sales 12,15,000
less COST OF SALES
Opening inventory 82,200
add Purchases 7,78,800
8,61,000
less closing inventory note 1 -1,01,640 -7,59,360
GROSS PROFIT 4,55,640
Less Expenses
Wages and Salaries 1,77,500
add amount accrued note 3 1,220 1,78,720
Motor Expenses 87,400
Admin expenses 17,650
Heating and Lighting 4,950
Advertising expenses 13,280
less amount prepaid note 4 -8,470 4,810
Depreciation on:
Premises note 2 5,400
Equipment note 2 17,250
Motor Vehicles note 2 2,800 25,450 -318980
Operating Profit 1,36,660
less finance cost 0
Profit before tax 1,36,660
Tax 0
Profit for the year 1,36,660

Peter Piper
Statement of Financial position as at 31st December 2017
ASSETS £ £ £
Non-current Assets
Cost
Accumulate
d
Depreciation
Carrying
Amount
Freehold Premises (37,500+5,400) 2,70,000 -42900 2,27,100
Equipment (97500+17,250) 1,72,500 -114750 57,750
Motor Vehicles (14,000+2,800) 28,000 -16800 11,200
4,70,500 -174450 2,96,050
Current Assets
Inventory 1,01,640
Trade Receivables 1,06,960
Prepayments: advertising note 4 8,470
cash 2,440 2,19,510
TOTAL ASSETS 5,15,560
EQUITY AND LIABILITIES
Equity
Capital 3,32,120
add profit for the year 1,36,660
less Drawings -42,640
Total Equity 4,26,140
Current Liabilities
Trade Payables 76,910
Accruals: Wages and salaries note 3 1,220

Bank Overdraft 11,290 89,420
TOTAL EQUITY AND LIABILITIES 5,15,560
CLIENT 3
Consistency
It is related to convection that are based on accounting principles. In this principle says
that business will create consistency in the business.
Prudency
According to this recorded data after the knowing completely about that. Aspects know
related terms are identified after that are shows in the statements.
Purpose of depreciation
It is calculating to know actual value of the assets. Mainly it is applied on fixed assets and
properties. With the helps know about value of the property after 20 years and when want to sell
out of properties to help to know actual value. On the basis know profit after selling out of assets.
Method of calculating depreciation
For calculation of depreciation companies adopted different methods according to
suitability. So here the methods of depreciation is -
1. Straight line method – According to this method applying a fixed percentage on the assets
and charged this fixed rate each year. Depreciation amount less from the actual amount.
2. Diminish method – In this method in each year taking different rate for charging
depreciation on the fixed assets. It is set according to marketing situations (Khan, 2015).
RAINTREE LTD
STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31ST DECEMBER
2017
£ £
Sales 1,07,000
less Returns Inwards -2,000
Net Sales 1,05,000
less COST OF SALES

Opening Inventory 17,000
add purchases 32,000
49,000
less closing inventory (note 1) -18,000 -31000
GROSS PROFIT 74,000
Less EXPENSES
Administration costs (28000+2000 accrued) 30,000
Distribution costs (22000-3000 prepaid+dep 11000) 30,000 -60,000
Operating Profit 14,000
Less finance costs 0
Profit before tax 14,000
less Tax (note 4) -4,000
Profit for the year 10,000
RAINTREE LTD
STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER 2017
ASSETS £ £
Non-current assets
Land and Buildings (60,000-(7,000+1,000)
Plant and machinery (65000-(15,000+10,000)
Total Non-current Assets
Current Assets
Inventory note 1 18,000
Trade Receivables 24,000
Prepayments note 3 3,000
Total Current Assets
TOTAL ASSETS 1,
EQUITY AND LIABILITIES
Equity
Share Capital@£1 each

Share Premium
Retained Earnings (22,000+10,000)
Total Equity 1,
Current Liabilities
Trade Payables 14,000
Accruals note 3 2,000
Bank overdraft 15,000
Corporation tax payable note 4 4,000
Total Current Liabilities
TOTAL EQUITY AND LIABILITIES 1,
depreciation on
buildings=
(60000-10000)/
50 = 1000
P&M =
20%*(65000-
15000)= 10000
11000
CLIENT 4
Bank Reconciliation Statement
In the business have many transactions happened so some transactions are basis on cash
and some are basis on bank. So all transactions are relayed to bank are recorded in bank column
and cash related are recorded in cash column. But5 some times bank balance and cash balance
does not match so for this rectification prepare of bank reconciliation statement in this mainly
including bank related transactions (Weil, Schipper, and Francis, 2013).
Explain areas of to record bank records
For the record of bank related transactions are recorded in cash book because in this cash
book have two columns, first one is cash and second is bank. So bank related transactions are

recorded in cash books but when these transactions are not match that time using bank
recompilation statement.
step 1 correct the cash book
Dr CR
corrected cash book
date details £ date details £
31 Dec 17 balance b/d 19973 31 Dec 17 overstated amount 1
31 Dec 17 overstated amount 9 31 Dec 17 bank charges 47
standing order 137
direct debits 297
31 Dec 17 Balance C/f 19500
19982 19982
31 Dec 17 Balance B/D 19500
statement of bank reconciliation as at 31/12/2017
£
balance as per the bank
statement 19738
add Outstanding Lodgements 119
19857
less unrepresented cheques
(97+260) -357
Balance as per cash book 19500

CLIENT 5
Sales ledger control account
It is also known as trade debtors control account and that is part of balance sheet. In this
accounts shows that equal balances of individual customer and sales account. In this account
recorded all sales related.
Purchase ledger control account
In this account recorded all, purchase related transactions, that are compare to individual
customer account.
Need to prepare control accounts
It is need to prepare control accounts because they are control on these items and
matching the balances according to transactions.

CLIENT 6
Suspense account
It is a that account where add uncategorised transactions. This is helping to hold that
amount while not deciding that where to classify them. A suspense account is useful to hold the
information related to variance as receiving further data. For balancing of any statement that time
are using this account that is main feature pd this accounting. It is mostly using to clear out of
regular basis in small business (Nobes, 2014). When identify which accounts related that amount
that time clear the account that will be zero.
Differentiate between a suspense account and a clearing account
Both accounts are temporary accounts because when identify that amount that time clear
amounts and account will be removed. But when clear account that time they apply different
functions and transact to hold transactions. Suspense account opening when both sides balances
not showing accurately and clearing accounts using when clearing purpose of on the remaining
amount and that is reviewed. Mostly clearing accounts using by companies compare to suspense
accounts.