Financial Accounting Homework: Detailed Client Solutions Analysis

This financial accounting assignment solution provides a comprehensive overview of various accounting concepts and their practical application through multiple client scenarios. The solution covers the definition of financial accounting, relevant regulations, accounting rules, and principles like accrual and going concern. It includes detailed examples of books of prime entry, ledgers, and trial balances for Client 1. Client 2 and 3 solutions feature the preparation of profit and loss accounts and statements of financial position, along with explanations of consistency, prudence, and depreciation methods. Client 4 focuses on bank reconciliation statements, updated cash books, and the reasons for balance variations. Client 5 covers sales and purchase ledger control accounts, explaining their purpose. Finally, Client 6 addresses suspense accounts and journal entries for rectification. The assignment comprehensively demonstrates the application of accounting principles and practices in real-world scenarios.

FINANCIAL ACCOUNTING
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TABLE OF CONTENTS
INTRODUCTION................................................................................................................................3
A. (i) Defining financial accounting................................................................................................3
(ii) Explaining the regulations relating to financial accounting......................................................3
(iii) Describing accounting rules and principles..............................................................................4
(iv) Explain conventions and concepts of consistency and material disclosure..............................4
CLIENT 1.............................................................................................................................................5
(i) Books of prime entry...................................................................................................................5
(ii) Ledgers.....................................................................................................................................11
(iii) Trial balance............................................................................................................................19
CLIENT 2...........................................................................................................................................20
(A). Statement of profit or loss account.........................................................................................20
(B). Statement of financial position...............................................................................................21
CLIENT 3...........................................................................................................................................22
(A). Statement of profit or loss account.........................................................................................22
(B). Statement of financial position...............................................................................................23
(C). Explaining consistency and prudence accounting concept....................................................23
(D). Depreciation, purpose and two methods................................................................................24
CLIENT 4...........................................................................................................................................24
(A). Purpose of preparing bank statement.....................................................................................24
(B). Key areas which may create vary balance in bank records and bank statements...................24
(C) (i) Bank reconciliation statement at 1st December 2016..........................................................25
(ii) Updated cash book of Kendal ltd for December 2016.............................................................25
(iii) Bank reconciliation statement as on December 2016.............................................................25
CLIENT 5...........................................................................................................................................26
A. (i) Sales ledger control account.................................................................................................26
(ii) Purchase ledger control account..............................................................................................26
B. Meaning of control accounts.....................................................................................................26
CLIENT 6...........................................................................................................................................27
A. Suspense account meaning and its features..............................................................................27
B. Trial balance..............................................................................................................................27
C. Journal entries for rectification.................................................................................................28
D. Differentiate suspense and clearing account.............................................................................28
CONCLUSION..................................................................................................................................28
REFERENCES...................................................................................................................................30
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INTRODUCTION
Financial accounting is a field or branch of accounting that consider money as a means of
measuring and recognising economic performance. It gathers information regarding monetary
transactions of the business and record, summarize and interpret it by preparing annual accounts
encompasses statement of comprehensive income, balance sheet and statement of cash flow as well.
The current research assignment presents accounting guidelines and rules that is necessary to follow
while preparing financial statements. Moreover, different accounts such as profit and loss account,
statement of financial position, bank reconciliation statement, accounts payable and accounts
receivable control accounts will be prepared following applicable standards.
A. (i) Defining financial accounting
FA can be defined as a entire system that records, monitor and control only monetary
activities or the flow of money in and out from the enterprises as revenues, expenditures, assets and
liabilities as well. It collects the financial information so as to construct their annual accounts i.e.
income statement and balance sheet and report the result of business functioning to the top
management, lenders, investors, taxation authorities and others for varied purpose (Hahn, Fairchild
and Dowis, 2013). Income statement reports transactions that will either bring revenue into the firm
and results in outflow of cash in the form of expenditures so as to determine the net results i.e. net
profit or loss. It record transactions following accrual concepts therefore both the revenues and
expenditures of the current year will be reported regardless whether expenses is still unpaid and
revenues is still not received in cash. However, on the other side, balance sheet reports assets &
liabilities to measure the financial status at the end of the period. As per Company Act, 2006, both
the statements needs to be prepared following GAAP, IAS and IFRS for improving transparency
and harmonization.
(ii) Explaining the regulations relating to financial accounting
There are some regulatory requirement which is necessary to be applied and implemented by
the UK establishments while reporting their transactions in annual accounts. In order to record the
activities, accountant generally follows UK GAAP which provides essential guidelines &
conventions to report the monetary transactions. However, multinational organizations need to
follow global standards i.e. international accounting standards (IAS) and International Financial
Reporting Standards (IFRS) to publish their annual financial statements in the front of external user
i.e. investors, lenders, suppliers, tax authorities and others (Alver, Alver and Talpas, 2013). Issuance
of IFRS mainly targeted at building faith among investors as they will be able to compare the
performance of different entities and can make rationalized investment decisions. Besides this,
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company Act 2006 make legal obligations for both the private as well as publicly listed companies
to audit their accounts so as to make it sure that the constructed accounts are free from any material
misstatement and present true and fair position and profit and loss (McAuley, 2015). It helps
outsiders i.e. investors, lenders, suppliers, tax authorities and others to gather prominent and
authentic information so as to make successful decisions.
(iii) Describing accounting rules and principles
Accrual accounting concept: It is based on the principle that every monetary activity that
will either drive revenue into the organization or results in cash outflow as an expense will be
record immediately when occur instead of their actual impact on cash position. It means that P&L
account records outstanding expenses and accrued revenues of the current year to determine net
profit or loss.
Going concern concept: This principle believes in continual operations of the
establishments and there is no possibility that in the future period, company may go into liquidation.
It enables businesses to amortize depreciation over the estimated life period of assets (Gregory, Uys
and Gregory, 2014).
Monetary concept: Financial accounts treat money as a source of measuring the impact of
transactions over businesses therefore; it presents only the quantitative information such as revenues
from sales, purchase, administration, selling and distribution expenses as well.
Full disclosure concept: It states that every monetary transaction will be disclosed clearly
in the company’s annual reports along with the followed accounting rules, principles and standards
in footnotes (Beatty and Liao, 2014).
(iv) Explain conventions and concepts of consistency and material disclosure
Consistency concept: This concept is based on the assumption that once followed
accounting principles will be followed continually until and unless, there is no sound reason to
change it so as to improve the current financial reporting system. It helps entities to analyze and
compare the results of business operations over different accounting years.
Material disclosure concept: This method demonstrates that several items which does not
have any significant effect on the accounts and consider immaterial by professional judgements can
be excluded from the financial statements (Henderson and et.al., 2015). Thus, it can be said that this
principle enable businesses to violate the matching accounting principles by not disclosing the
immaterial information in the annual accounts.
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CLIENT 1
(i) Books of prime entry
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(ii) Ledgers
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