Introduction to Financial Accounting: Analysis of Conga's Financials

This report delves into the realm of financial accounting, utilizing Conga, a UK-based sole trader toy retailer, as a practical case study. It meticulously examines the importance of maintaining comprehensive accounting records and preparing accurate financial statements, including the income statement, balance sheet, and trial balance. The report provides journal entries and ledger accounts for Conga. Furthermore, it elucidates the application of the prudence and accruals concepts in financial reporting. The analysis extends to the practical implications of Value Added Tax (VAT) on sales. Overall, the report serves as a comprehensive guide to understanding and applying fundamental financial accounting principles within a real-world business context.

Introduction to
Financial Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1) Accounting records & financial statements for Conga............................................................1
2) Prudence concept and accruals (matching) concept..............................................................10
3) Value Added Tax ..................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES .............................................................................................................................13

INTRODUCTION
For an organisation it is important to make financial accounts in each financial year. It is
the process of recording, summarizing & reporting the financial transactions of the business
which are related to a specific period of time. It involves income statement, cash flow, financial
position of accounts and financial statements. To better understand this concept Conga has been
selected which is a sole trader toy retailer of UK. In this report, there are following topics are
covered such as: to prepare the accounting records & financial statements, trail balance concepts
of prudence and accruals & its applications in the company. Apart from this it also discuss about
the Value Added Tax to the sales.
MAIN BODY
1) Accounting records & financial statements for Conga
Accounting records are beneficial to record the financial records in the books of accounts
of company. An accountant is responsible to manage the accounts and record the activities. For
Conga, it is necessary to prepare the financial statements over a specific period of time. It
provides the financial information in context to the corporation. Financial statements are the
reports which are made by management of firm. It includes income statements, balance sheet,
cash flow & statement of owner's equity (Sunder, 2016). Outsiders such as: customers,
shareholders, creditors, investors get information from the financial statements and take
important decisions associated to the investment. It is require to be prepare in structured manner
for the purpose to provide true and fair information related to the financial position of
corporation. As the financial statements of Conga, provide the appropriate information about the
wealth and current position of organisation. On the basis of this management can take important
decisions for the future expansion of business so that it can maximize its market share and
increase the profits. So it is necessary for the corporation to prepare accounting records and
financial statements (Wang, 2014).
Income statement: It shows the financial results of a firm related to a specific period of
time. This statement shows the income which is generated by the organisation from its business.
It is also known as statement of earning and basically 3 financial statements used to assess a
corporation performance which involves cash flow statement, balance sheet and income
1

statement. Conga use this statement to record expenditure and income, which is earned by
organisation, related to a specific period.
Balance sheet: This specific statement shows the financial position of organisation that
states liabilities, owner's equity, and assets over a particular period. It is helpful to analyse the net
worth of Conga.
Trial balance: In this statement the balance of all ledgers are compiled into credit &
debit column totals are equal. It can be prepare periodically, normally at the end of the reporting
period. The main purpose is to sure that entries in bookkeeping system are mathematically
appropriate (Shi and Goo, 2014).
Journal entries in the books of Conga
S.NO. PARTICULARS DEBIT CREDIT
1 Purchase a/c 900
To Roman account 900
2 Purchase a/c 2200
To Dean account 2200
3 Purchase a/c 1000
To Seth account 1000
4 Purchase a/c 7200
To Nick account 7200
5 Purchase a/c 2700
To Ziegler account 2700
6 Rent a/c 2300
Cash account 2300
7 Electricity a/c 2000
Cash account 2000
8 Wages a/c 3600
Cash account 3600
9 Roman a/c 2000
To Return outwards a/c 2000
10 Dean a/c 3200
To Return outwards a/c 3200
11 Accounts payable
a/c 2200
To cash account 2200
12 Accounts payable
a/c 900
2

To cash account 900
13 Arron a/c 1200
To sales a/c 1200
14 Ross a/c 1300
To sales a/c 1300
15 David a/c 5000
to sales a/c 5000
16 Maxwell a/c 4000
to sales a/c 4000
17 Robin a/c 2200
to sales a/c 2200
18 Cash a/c 3100
To sales a/c 3100
19 Cash a/c 4000
To sales a/c 4000
20 Cash a/c 1400
To sales a/c 1400
21 Return inward a/c 2200
To Arron a/c 2200
22 Return inward a/c 2300
To Ross a/c 2300
23 Cash a/c 2200
To account receivables
a/c 2200
24 Cash a/c 1800
To account receivables
a/c 1800
25 Cash a/c 2800
Discount allowed
a/c 200
To Arron a/c 3000
26 John a/c 3000
To discount received
a/c 500
To cash a/c 2500
27 Cash a/c 2000
To capital a/c 2000
28 loan a/c 7200
interest a/c 400
To bank a/c 7600
3

29 Wages a/c 220
To wages payable a/c 220
30 Depreciation a/c 2200
To accumulated dep.
A/c 2200
31 Bad debts a/c 200
To allowance for
doubtful debts a/c 200
Ledger in the books of Conga
Journal ledger
Date
PARTICUL
ARS Dr date particulars Cr
Purchase account
2018 2018
01/12/0
1 To Roman a/c 900 By balance c/d 14000
02/12/0
1 To Dean a/c 2200
03/12/0
1 To Seth a/c 1000
04/12/0
1 To Nick a/c 7200
05/12/0
1 To Ziegler a/c 2700
14000 14000
4

Sales account
2018 2018
To balance
c/d 22200 01/12/02 By Arron a/c 1200
02/12/02 By Ross a/c 1300
03/12/02 By David a/c 5000
04/12/02
By Maxwell
a/c 4000
05/12/02 By Robin a/c 2200
06/12/02 By cash a/c 3100
07/12/02 By cash a/c 4000
08/12/02 By cash a/c 1400
22200 22200
Cash a/c
To sales 3100 By rent 2300
To sales 4000 By electricity 2000
To sales 1400 By wages 3600
To a/c
receivables 2200 By a/c payables 2200
To a/c
receivables 1800 By a/c payables 900
To Arron a/c 1200 By John a/c 3000
To capital 2000
By balance c/d 1700
15700 15700
5

Return outwards a/c
To balance c/d 3100 By Roman a/c 900
By Dean a/c 2200
3100 3100
Return inwards a/c
To Arron a/c 1200 By balance c/d 2500
To Ross a/c 1300
2500 2500
Rent a/c
To cash a/c 2300 By balance c/d 2300
Electricity a/c
By balance c/d 2000
To cash a/c 2000
Wages a/c
To cash a/c 3600 By balance c/d 3820
To wages payables
a/c 220
Discount allowed a/c
To Arron a/c 1200 By balance c/d 1200
6

Sunder, S., 2016. Discount received a/c
By balance c/d 3000 To John a/c 3000
Capital a/c
To balance c/d 2000 By a/c payables 2000
Depreciation a/c
To accumulated
dep 2200 By balance c/d 2200
Bad debts a/c
To allowance for
bad debts 200 By balance c/d 200
Account receivables
To balance c/d By cash a/c 2200
By cash a/c 1800
Account payables
To cash a/c 2200
To cash a/c 900 By balance c/d
Purchase book
Date Customer Invoice no Amount
01/12/01 Roman 900
02/12/01 Dean 2200
7

03/12/01 Seth 1000
04/12/01 Nick 7200
05/12/01 Ziegler 2700
14000
8

Sales book
Date Customer Invoice no Amount
01/12/01 Arron 1200
02/12/01 Ross 1300
03/12/01 David 5000
04/12/01 Maxwell 4000
05/12/01 Robin 2200
13700
Return out wards book
Date customer Invoice no Amount
01/12/01 Roman 900
02/12/01 Dean 2200
3100
Return inwards book
Date Customer Invoice no Amount
01/12/01 Arron 1200
02/12/01 Ross 1300
2500
In the books of Conga
Trial Balance
S no. Ledger a/c Dr Cr
1 Capital a/c 2000
2 Purchase a/c 14000
3 Sales a/c 22200
9

4 Cash a/c 15700
5 Return inward a/c 2500
6 Return outwards a/c 3100
7 Rent a/c 2300
8 Wages a/c 3820
9 Electricity a/c 2000
10 Discount allowed a/c 1200
11 Discount received a/c 3000
12 Depreciation a/c 2200
13 Dad debts a/c 200
14 Accounts receivables 4000
15 Accounts payable a/c 3100
Suspense a/c 12320
Total 46820 46820
Profit and loss account
PARTICULARS AMOUNT
I revenue from operations:
sales a/c 249000
ii other incomes
iii total revenue (i+ii) 249000
iv expenses:
cost of material used
depreciation 50000
puchase of stock in trade 60000
rent a/c 25000
electricity a/c 22000
wages a/c 45000
total exp. 202000
v profit before exceptional
and extra ordinary items(iii-iv) 47000
vi exceptional items
vii
profit before extra ordinary
items 47000
10