Financial Accounting Report: Regulations, Principles, and Client Cases

This report, prepared as part of a junior accountant's role in a small consultancy firm, provides an in-depth analysis of financial accounting principles and regulations. It begins by defining financial accounting and its importance in recording and analyzing financial transactions, covering key financial statements like the profit and loss account, balance sheet, and cash flow statement. The report then delves into the regulations governing financial accounting, including those from IASB, FRC, and IFRS. It also discusses fundamental accounting rules and principles such as the going concern principle, full disclosure, matching principles, and the monetary unit assumption, along with conventions like consistency and material disclosure. The report then applies these principles through the examination of six client case studies, each involving the analysis of journal entries, ledger accounts, trial balances, income statements, and balance sheets. Topics covered include depreciation, bank statements, control accounts, suspense accounts, and reconciliation statements. The report aims to demonstrate the application of accounting principles in real-world scenarios, providing a comprehensive overview of financial accounting practices.

FINANCIAL ACCOUNTING
PRINCIPLES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
A. Regulation of financial accounting has been discussed in the form of report to line manager
.....................................................................................................................................................1
1. Define financial accounting ..................................................................................................1
2. Regulations relating to financial accounting...........................................................................2
3. Accounting rules and principles.............................................................................................3
4. Conventions and concepts relating to consistency and material disclosure............................4
CLIENT 1........................................................................................................................................4
1. Journal of Client 1 as on 1st may 2017...................................................................................4
2. Drawing ledger accounts of above journal entries..................................................................6
..........................................................................................................................................................7
3. Client 1's Trial Balance.........................................................................................................15
CLIENT 2......................................................................................................................................16
A. The income statement of Peter Piper as on 31st December 2017........................................16
B. Balance sheet as on 31st December 2017 of Peter Piper......................................................16
CLIENT 3......................................................................................................................................18
A. Income Statement as on 30th September 2017 of Raintree limited.....................................18
B. Financial position of Raintree limited..................................................................................19
C. Describing various accounting principles and concepts.......................................................24
C. Depreciation with its purpose and types...............................................................................25
CLIENT 4......................................................................................................................................25
A. Objective of drawing bank statement ..................................................................................25
B. Specifying reasons for records maintained in Bank statements...........................................25
C. Cash book in context of client..............................................................................................25
CLIENT 5......................................................................................................................................26
A. Drawing Sales ledger control account and purchase ledger control account as of May 2017
of Henderson.............................................................................................................................26
B. Elaborate Control account ...................................................................................................27
CLIENT 6......................................................................................................................................27
A. Defining suspense account with its essential features..........................................................27
B. Framing trial balance............................................................................................................28
C. Journal entries.......................................................................................................................28
D. Difference of Clearing and Suspense account .....................................................................29
CONCLUSION..............................................................................................................................29
REFERENCES..............................................................................................................................30

INTRODUCTION
Financial accounting is analysed as an essential element which is used for recording of
key financial transactions. It is useful for small business owners as it provides a methodological
approach in order to describe the business activities. It is also considered as a broader term for
the controlling of assets and liabilities (Deegan, 2013). Financial accounting provides in-depth
analysis of monetary resources which are required for performing various important activities
associated with business. Present report is based on analysis of different key financial
regulations, basic rules and principles of financial accounting. As a junior accountant in small
consultancy firm, report is to determine the awareness of organisation towards regulations of
accounting. In addition, six clients that provide support in describing different key financial
statements like profit and loss account, balance sheet and cash flow statement are also discussed.
Appropriate structure and analysis transactions related to sales and purchase for compilation in
trial balance are also evaluated in this report. At last, clients will provide important properties
about reconciliation statements, purchase as well as sales ledger account along with the
discussion related to suspense account.
A. Regulation of financial accounting has been discussed in the form of report to line manager
From: Junior accountant
To: Line Manager
Subject: Determination of different regulation, rules and principles of financial
accounting
Respected Sir,
This report is made for improvement of the important activities of financial
transactions associated with business. However, there is the major need of recognising
various rules, regulations and important methods used for application of various
principles of accounting.
Further, business operations must be improved through application of different
accounting techniques and their results will be considered as beneficial for the allocation
of budget, cost and prediction of various operational activities linked with the
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organisation or business.
1. Defining financial accounting
Financial accounting has been analyzed as specialized and important branch of
accountancy which keeps record and track on organization’s financial business
transactions. Utilizing standardized guidelines, the transaction of sales and purchase have
been recorded, analyzed and presented in the form of reports for determination of
company’s financial position in market (Scott, 2015). It is an important tool for attracting
shareholders whereas small business enterprise can use it as tool for analysis of financial
strength of their business.
There are usually various kinds of financial statements which are formulated by small
business enterprise in order to attain set objectives. Some of them are mentioned as
below:
 Profit and loss statement
 Income statement
 Balance sheet
 Stakeholder' equity statement
 Cash flow statement
 Budgets
These financial statements are analyzed as external because these are formulated
for people outside the organization such as shareholders, investors, financial institutions
and government. Company can issue these financial statements on their website so that
these will be easily accessible to capitalist and it will be able to attract more investors.
When the stock of business enterprise is traded publicly, then its financial statements will
have circulated to the stakeholders (Edwards, 2013). It is significant for accomplishment
of financial business objectives. It is not in the form of financial evaluation of firm. Key
objective of financial accounting is to provide information related company financial
statements to externals.
2. Regulations relating to financial accounting
This usually involves various regulations that will be effective for formulation of
legal structure of accounting. These rules and provision have been formulated by
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government for corporate reporting and monitoring business enterprises in UK. The
major authorities involved in formulation of regulations are corporate reporting of UK
and financial reporting council.
It has provided different methods of financial reporting to department of government and
various corporate (Deegan, 2012). In this context, there are various important regulation
which are accepted by organization are mentioned below:
IASB: Aim of this accounting standard is to maintain and disclose appropriate
information to professionals and important guidelines for the purpose of drafting reports
and database of financial statement. It is also used for providing appropriate revelation of
accounts. A legal structure is there for determination of financial information that will be
accepted by stakeholders and used for influencing investors from different countries
(Financial Accounting, 2018).
FRC: It is a major regulation of financial accounting which is formulated by different
authorities and corporation of UK after consideration of standards of accounting. These
standards are usually framed by monitoring and execution of important financial
disclosures associated with finance with promotion high quality governance (Scott,
2015).
IFRS: Information provided by the standards of IFRS has provided a relevant framework
and organization’s disclosure of key financial statements. It provides support to
organization in influencing a large population of institutions and investors. It is beneficial
for the estimation of expenditures and cost that occur while performing operational
activities of business.
3. Accounting rules and principles
There are various important principles of financial accounting which are
provided by GAAP used for controlling company's transactions. Some of them are
discussed as below:
 Principle of Going Concern: Principles of accounting are based on the
assumption that small business enterprise will remain within company for the
foreseeable future. Adequately, it means that company will not be forced for
halting its business operations and liquidation of assets.
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 Principle of Full Disclosure: This principle needs an organization to disclose the
necessary information so that individuals are accustomed for analysis of
statements and they will be able to create informed decisions concerning the
business enterprise (Warren, and Jones, 2018). In this, company will describe its
accounting policies on important and initial note of given statement.
 Matching principles: This principle provide understanding that expenses needs to
be matched in the specific accounting year with total revenues. It is a principle of
accrual accounting and revenue recognition (Lubbe, Modack and Watson, 2014).
 Assumption of Monetary Unit: It provides understanding that transactions related
to business should be in US dollars as the currency has been accepted by every
country and it is also stable currency which contains fluctuations.
 Materialist: Various aspects of financial statement and data are there which are
analyzed and gathered from relevant sources. In this, efforts will be in the
perspective of providing important material information that is completely
relevant (Scott, 2015).
 Economic Unit Assumption: Overall, important transactions related to business
enterprise will be considered as separate from personal transactions.
4. Conventions and concepts relating to consistency and material disclosure.
Study determined that there is major presence of different terms such as
materiality, convention, full consistency, disclosure and conservatism within perspectives
of financial accounting concepts and conventions (Weil, Schipper and Francis, 2013). In
order to analyze the principles, there are major needs of formulating perfect disclosure
about different account.
It is also useful to gain understanding of concepts like:
Material disclosure: There is the major requirement of disclosing various financial
accounts that involve various materials like important objects which are needed for
maintaining the records of stakeholders through analysis of efficiency and probability of
enterprise for accomplishment of set standards and goals (Horngren and et.al, 2012).
Consistency: In this principle, company's nature of business will be followed and trade
practices are accomplished in market. Overall, operations related to business will achieve
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consistency of perfection and important benefit in terms of profitability.
CLIENT 1
In this task, all financial statements are given with respect to Alexander such as trial
balance, ledger and journal that are been assessed with respect to each transaction (Edwards,
2013).
1. Journal of Client 1 as on 1st may 2017
Date Particulars Debit Credit
1 Storage expenses a/c dr. 400
To bank a/c 400
2 Purchase a/c dr 6080
To R. foot a/c 1610
To S. Hood a/c 1450
To W. tone a/c 960
To D Main a/c 2060
3 F. Lane a/c dr 770
J. Wilson a/c dr 1120
P. White a/c dr 2420
T. Cole a/c dr 1640
F. Syme a/c dr 2080
J. Allen a/c dr 910
to sales a/c 8940
4 Motor car expense a/c dr 470
To cash a/c 470
7 Drawing a/c dr 1500
to cash a/c 1500
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9 T. Cole a/c dr 680
J. Fox a/c dr 1310
To Sales a/c 1990
11 Sales return a/c dr 680
To F. Syme a/c 410
To J. Wilson 270
14 Van a/c dr 28500
To Abel Motors 28500
16 (a) bank a/c dr. 1330
Discount allowed a/c dr 70
To p Mullen 1400
(b) Bank a/c dr 2945
Discount allowed a/c dr 155
To F. Lane 3100
(c) Bank a/c dr 807.5
Discount allowed a/c dr 42.5
To J. Wilson 850
(d) Bank a/c dr 1586.5
Discount allowed a/c dr 83.5
To F. Syme 1670
19 R. foot a/c dr 50
To Purchase return a/c 50
22 Purchase a/c dr 3740
To W. Wright a/c 1910
To L. Mole a/c 1830
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24 (a) S. wood a/c dr 3600
To Bank a/c 3240
To discount received a/c 360
(b) J. Brown a/c dr 4600
To Bank a/c 4140
To discount received a/c 460
(c) R. foot a/c dr 1400
To bank a/c 140
To discount received a/c 1260
27 Salaries a/c dr 4800
To Bank a/c 4800
30 Business artes a/c dr 1320
To bank a/c 1320
31 Abel motors Ltd a/c dr 20500
To Bank a/c 20500
2. Drawing ledger accounts of above journal entries
There are various accounts which have several transactional entries according to each
transaction in above journal entries. Managers and owners of business will be benefited by brief
analysis of cost and gains which are obtained on the basis of various sources of each activity in
context of operations of specified business (May, 2013). There will be major contribution in
structuring plans and for decision making that will lead to reduce the cost and expenses of
company.
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