Financial Accounting Homework: Comprehensive Case Study Analysis

This document presents a comprehensive financial accounting homework assignment solution, covering a range of topics. It begins with an introduction to financial accounting, defining its purpose and objectives, and exploring the interests of internal and external stakeholders in financial statements. The solution then delves into practical applications, including journal entries, trial balances, income statements, balance sheets, and bank reconciliation statements. It includes explanations of accounting concepts like depreciation, control accounts, and suspense accounts. The assignment analyzes different clients, providing detailed solutions for each, from recording transactions to preparing financial statements. The document offers a complete overview of financial accounting principles and practices, making it a valuable resource for students seeking to understand and apply accounting concepts.

Financial Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
a. ......................................................................................................................................................1
1.Defining financial accounting and its objectives.....................................................................1
2.Explaining the internal and the external stakeholders and their in interest in the company's
financial statements.....................................................................................................................2
b........................................................................................................................................................3
Client 1.............................................................................................................................................3
I. Recording and classification of the journal entries..................................................................3
ii. Preparation of the trial balance...............................................................................................3
Client 2.............................................................................................................................................3
a. Preparation of the income statement.......................................................................................3
b. Statement of balance sheet......................................................................................................3
c. Explaining the concepts of accounting....................................................................................3
d. Describing the purpose of charging depreciation and various methods used by the
organization for evaluating depreciation.....................................................................................4
e. Evaluating the difference in between the financial statements of sole trader and the limited
company......................................................................................................................................4
Client 3.............................................................................................................................................5
a. Explaining the objective of formulating the bank reconciliation statement............................5
b...................................................................................................................................................5
c. Explaining the concept of imprest in the system of petty cash...............................................5
d. Preparation of bank reconciliation statement..........................................................................5
Client 4.............................................................................................................................................5
a. Preparing sales and the purchase ledger account....................................................................5
b. Explaining the meaning of control account ...........................................................................5
Client 5.............................................................................................................................................5
a. Explaining the meaning and the features of suspense account ..............................................5
b. Drafting a trial balance ...........................................................................................................5

c. Rectification of errors .............................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Financial accounting refers to the process that involve the collection and the processing
of the financial information in order to meet the need of internal and the external parties relating
to their decision making. The present study is based on several aspects of the financial
accounting that include its purpose and interest of the users in the accounting information of the
organization. Journal, ledger and trial balance is been under the study for recording and reporting
the results of the financial transactions. Various accounting concepts and the methods of
depreciation are also been described under the report. Furthermore, income statement and
balance sheet are also formulated. Moreover, Bank reconciliation statement with the description
of its purpose is been mentioned and concept and features of control and the suspense account is
also included.
a.
1.Defining financial accounting and its objectives
Financial accounting is the practice that records, analyse, summarize and report the
business transactions resultant from the operations of the business over the time period. It utilizes
a set of the accounting conventions and the principles at the time of financial accounting. These
accounting principles are formulated and established for the purpose of facilitating consistent
information to the investors, regulators, tax authorities and the creditors. Financial accounting is
been performed using the accrual and the cash method (Mullinova, 2016). It results in the
reporting of the income by preparing the income statement and financial position by formulating
the balance sheet. There are various purposes of the financial accounting as follows-
The main purpose or objective of financial accounting is to facilitate the information which is
required for making the suitable decisions and to frame the financial reports which results in
providing the information relating to the performance of the company to the internal as well as
the external users. Other objectives include-
Relevancy- The foremost purpose of financial accounting is to provide the relevant
information to the users which helps them in making the decisions regarding their financial well
being. It helps in making the investment decisions for the investors.
Reliability- Accounting information that is recorded been entered in the financial
statements must be reliable which means free from bias and does not contain any misleading
statement. Reliability can be attained by the organization through the verification of the
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accounting treatments and the transactions based on the audits. This in turn enable the end users
in taking the best decisions by using the financial information.
Consistency- It is also one of the most important objective of financial accounting to gain
consistency in recording and communicating the financial information (Dutta and Patatoukas,
2016). This help the users in comparing the financial results of various periods with appropriate
disclosures.
Comparability- Facilitating the information that comprises the quality of comparison is
also a main purpose of the financial accounting. An organization uses the established system in
case of recording and reporting the financial information of the business so that investors can
compare the data for making the relative judgements for availing various investment
opportunities.
Thus, these are the major purpose for which the organization opts for financial
accounting in order to provide the adequate information to the users with compliance of all
standards and the concept of accounting as provided by IFRS and GAAP.
2.Explaining the internal and the external stakeholders and their in interest in the company's
financial statements.
Business organization functions in the large environment which involves many factors
that directly or indirectly affects the financial wealth of the enterprise. Stakeholders are
considered as one of the major factor that influences the activities of the organization.
Stakeholders are categorised into two segments that is internal and the external stakeholders.
Internal stakeholders means the individual or the parties that are present within the
enterprise. For example- Employees, owners, managers and investors.
Owners- For assessing the performance of their organization, they seek for the financial
statements that facilitate the useful information relating to the profitability and the position of
overall business organization across the globe (Barth, 2015). They show the keen interest in the
financial information as it helps in determining the stability level and the extent to which the
economic factors has affected their business. Financial information assist the owners in deciding
for making the further investment in the existing or the new business ventures that generates
large profits.
Managers- They require the financial information for planning, monitoring and in
making the relevant decisions for the business. Accounting information provides for allocating
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the financial, capital and the human resources adequately through the process of budgeting.
Financial accounting helps the manager in monitoring the business performance by making the
comparison against the past results, competitor analysis through benchmarking and key
performance tool (Libby, 2017). Managers can form the business decisions like financing,
pricing and the investment appropriately by using the accounting information.
External stakeholders refers to the parties that are present outside the organization and
highly affects the activities of the business. For instance- investors, customers, lenders, tax
authorities, suppliers, Auditors and the government.
Investors- They need accounting information in order to analyse or assess the
performance of the organization in which the investment has been made by them. Primarily they
use the financial statements that are published by the organization for evaluating the profitability,
risk and the valuation in respect of their investment. Investors uses the financial information for
identifying that the investment made be them is good or in deciding whether to hold, decrease or
increase the portion of their investment from the organization.
Lenders- They utilise the accounting information in order to know the credit-worthiness
of the organization that means whether the enterprise capable of paying back the loan. They offer
the loans or the other credit facilities on the basis of financial health of the organization.
Government- They require accounting information for ensuring that the organization has
presented all the disclosures in accordance with the rules and the regulations as provided in the
accounting standards (De Waegenaere, Sansing and Wielhouwer, 2015). Government prevents
the stakeholders interest by ensuring that the statements is been providing a true and the fair
view. Government defines the thresholds like sales revenue, net profit etc. in context of
determining the size and the scope of each business.
Auditors- External auditors makes the examination of the financial statements and the
recording of the accounting information for the purpose of forming an opinion. The other
external user rely on the opinion provided by the auditors relating to the financial well-being of
the organization as the accuracy of the information increases by conducting the audit
appropriately.
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B.
CLIENT 1
I. Recording and classification of the journal entries
Journal entries in the books of Alexandra for January 2019 are as follows
Date particulars Debit Credit
1st jan 2019 Storage exp.A/c Dr 450
To bank A/c
2nd jan 2019 Purchase A/c Dr 6080
To S. hood A/c 1450
To D main A/c 2060
To W Tone A/c 960
To R foot A/c 1610
3rd jan 2019 J Wilson A/c Dr 1200
T . Cole A/c dr 1650
F. Syme A/c Dr 2100
J . Allen A/c Dr 1020
P. white A/c Dr F. Lane A/c Dr 2520
F. lane A/c Dr 980
To sales A/c 9470
4th jan 2019 Motor Exp. A/c Dr 470
To cash A/c 470
7th jan 2019 Drawing A/c Dr 1500
To cash A/c 1500
9th jan 2019 T. cole A/c Dr 680
J. Fox A/c Dr 1310
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To sales A/c 1990
11th jan 2019 Sales return A/c Dr 680
To J. wilson 270
F.syme 410
16th jan 2019 Cash A/c Dr 7020
To P. Mullen A/c 1400
To F. Lane A/c 3100
To J. Wilson 850
To F. Shyme 1670
19th jan 2019 R. foot A/c Dr 50
To Purchase return A/c 50
22st 2019 Purchase A/c Dr 3740
To L.Mole A/C 1830
To W. Wright 1910
24th jan 2019 S. Hood A/c DR 3600
J. Brown A/c Dr 4600
R. Foot A/c Dr 1400
To Bank A/c 9600
27th jan 2019 Salary A/c Dr 4800
To bank A/c 4800
30th jan 2019 Business rates A/c Dr 1320
To bank A/c 1320
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