Financial Accounting Principles Report - Regulations and Rules

This report provides a comprehensive overview of financial accounting principles, emphasizing their importance in preparing accurate financial statements. It delves into financial accounting regulations, including GAAP and IFRS, and explores various accounting rules such as debit and credit applications. The report discusses key principles like the dual aspect concept, cost principle, and matching principle. Furthermore, it covers conventions such as consistency and material disclosure, illustrating their significance in financial reporting. Additionally, the report includes practical examples, such as journal entries, and account analyses for various transactions, including capital, sales, purchases, discounts, and expenses. Finally, the report touches on topics such as trial balance and partnership accounting, providing a well-rounded understanding of financial accounting practices.

Financial Accounting
Principles

INTRODUCTION
Financial accounting principles are helpful for an organisation because it provides help to
prepare financial statements correctly. Financial accounting is the process of recording,
summarizing and reporting the transactions of business over a period of time. It contains
accounting rules and principles which are needed to be follow while reporting financial data. For
a junior accountant it is essential to prepare financial reports by following the guidelines of
accounting principles so that true and fair information and data can be provided to corporation.
As a result, company can take effective decisions which help to accomplish its objectives. The
main aim of this report is ensure firm to follow the rules and principles of accountancy. This
report covers following topics such as: financial accounting regulations and its purposes,
accounting rules and its principles, concepts relating to consistency and material disclosure,
double entry book- keeping system, trial balance, partnership. Apart from this report also discuss
about bank reconciliation.
BUSINESS REPORT
1. Financial accounting
Financial accounting helps the company to prepare financial statements as per the rules
and regulations of accounting.It helps to classify, analyse, summarize and record financial
transactions of corporations (Schwaiger, 2015). Accountant is responsible to follow the rules and
policies of financial accounting so that relevant and accurate information can be analysed. There
are various purposes of its which are as follows:
 To provide true and fair picture of financial transactions of organisation.
 To analyse and understand the fundamentals of financial accounting (DRURY, 2013).
 Financial accounting provides help to know the financial health of organisation which
help the external parties (investors, creditors) to take effective investment decisions.
 Management of company can know the profits and losses of its business during current
financial year as a result manager can make future plans and strategies for future growth.
2. Regulations relating to financial accounting
Financial accounting has various regulations which are needed to be follow by an
accountant of organisation so that true and fair information can be produce and analyse. As a
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result, company can know its financial wealth and on the basis of it investors and creditors take
investment decisions. Regulations relating to financial accounting are described below:
 In financial accounting rules, standards and procedures of Generally Accepted
Accounting Principles can be follow by an organisation so that financial statements can
be prepare appropriate (Callen, 2015). There are various principles of GAAP which are
needed to be follow such as: principle of regularity, consistency, precedence, periodicity
etc.
 Regulations related to IFRS should follow by accountant of organisation because it
focuses that how a particular type of transactions.
 Regulations related to financial accounting such as debit and credit and their treatment in
accounting can be follow by the accountant of corporation so that relevant information
and data can be reported in financial statements (Alver and Talpas, 2013).
 As per the companies act it is mandatory to publish the books of accounts in front of
general public so that they can know the financial position of corporation.
3. Rules & principles
Rules of accounting can be follow by an accountant while preparing the financial
statements and these are as follows:
Debit the receiver, credit the giver: Specific rule can be helpful in personal accounts.
Examples of personal account are debtors, banks, creditors, capital account etc. When an
individual give something to corporation it becomes an inflow so person should be credit in
books of accounts. As well as a persons receive something from the organisation than amount
must be debit on name of person (Hale and Held, 2012).
Debit all expenses, credit all incomes : It is applied when there is something related
with nominal account. As capital of corporation is considered as its liability. Thus it has a default
credit balance. When all incomes are credited than it increases the capital & by debiting
expenditures, it decreases the capital. It helps organisation to stay in balance (Banerjee, 2012).
Debit what comes in, credit what goes out: It is useful in the case of real accounts. This
includes machineries, buildings etc. For example, an individual purchase furniture of $ 20000 in
cash, in that case furniture account would be debit by $ 20000 and cash account would be credit
by $ 20000.
Principles:
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Dual aspect concept: Dual aspect concept refers that companies are liable to record their
transaction in double on both debit and credit side of books. Single entry system records only
one aspect of the transaction which leads to recording of irrelevant information in books of
accounts. Therefore, to avoid this problem dual aspect principle assure that every transaction
needs to be recorded on both debit and credit side of accounts (Collier, 2015).
Cost principle: This principles assists that amounts of assets should be recorded at their
acquiring cost. It can be said that businesses are obliged to record an asset on their balance sheet
for the amount paid for the assets (Barth, 2015).
Matching principle: According to this principle, all expenses of business should be
matched with the revenues which are generated in same accounting period (Sanada, 2012).
4. Conventions & concepts
Conventions are based upon various rules of accounting. This is not legally binding
practices rather, it is a generally accepted convention based upon customs & it provides help to
accountant to resolve practical issues which can occurs while the preparation of financial
statements of organisation. There are following conventions of accounting which are described
as below:
Convention of consistency: In accounts it is necessary to similitude outcome of distinct
years so organisation can know the growth of business in each year. So it is essential to follow
accounting principles and rules for related transactions which are precede consistently.
Reliability of financial statements can lost due to the continuous changes which are analysed in
accounting treatment. For example, if an organisation has follow cost method for inventory
evaluation & for depreciation of fixed assets it follows written down method so it is necessary
for the company that it should follow these methods consistently and continuously. As a result,
comparison can be easy (Bebbington and Larrinaga, 2014)
Convention of material disclosure: As per this convention it is essential to disclose all
significant information so that accounts can prepare in that manner which provide appropriate
information to the persons. It is essential for an organisation to provide all information in
financial statements so that investors, creditors and owners can know the information related to
material. It helps them to take investment decisions (Edwards, 2013).
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CLIENT 1
(a) Journal Entry related to David Study
Date Particulars Debit Credit
01/01/
18
Premises Account Debit 440000
Motor Van Account Debit 45250
fixtures Account Debit 10100
Inventory Account Debit . 40900
P Mole Account Debit 2200
F Lane Account Debit 2100
Bank Account Debit 42400
Cash Account Debit 10600
To S Hamid Account 10150
To J. Brown Account 9600
To Capital Account Balancing Figure) 573800
(Being Owner's Capital is calculated )
Therefore, David Study's Capital at 1st January = £
573800
Date Particulars Debit Credit
01/01/
18
Storage cost Account Debit 800
To bank Account 800
(Being storage cost is paid)
02/01/
18
Purchases Account Debit 7680
To S Hamid Account 2450
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To D Main Account 2560
To W Tag Account 1060
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