Financial Accounting Techniques and Reporting for Business Efficiency

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FINANCIAL ACCOUNTING
1

Table of Contents
INTRODUCTION........................................................................................................................3
SCENARIO 1.............................................................................................................................. 4
1. RECORD TRANSACTIONS USING DOUBLE ENTRY BOOK-KEEPING AND PREPARE THE
TRIAL BALANCE.....................................................................................................................4
2. TO PREPARE THE FINANCIAL STATEMENTS.................................................................13
SCENARIO 2............................................................................................................................ 16
1. PREPARATION OF REVISED CASH BOOK AND BANK RECONCILIATION STATEMENT. . .16
a. PREPARING THE UPDATED CASH BOOK...................................................................16
b. DIFFERENCE AMONG THE DIRECT DEBIT AS WELL AS STANDING ORDER, BANK
CHARGES AND DIS-HONOUR CHEQUE............................................................................17
2. RECTIFICATION OF ERRORS.........................................................................................19
a. PREPARATION OF JOURNAL ENTRIES IN THE BOOKS OF MILKY...............................19
b. SUSPENSE ACCOUNT............................................................................................20
CONCLUSION.......................................................................................................................... 22
REFERENCES........................................................................................................................... 23
2

INTRODUCTION
In this report, the emphasis will be laid upon the management accounting techniques and
the various techniques such as the ledgers, journals, financial statements applied for
knowing the efficiency of the business. The rectification of errors and to record the bank
transactions the bank reconciliation statements are also being prepared.
3

SCENARIO 1
Being appointed as the junior assistant, in this segment, the importance of the double entry
bookkeeping system along with its books will be explained by recording the transactions of
Muhammad. These transactions are to be recorded in the journal book and also the ledger
accounts are to be maintained following the trial balance.
1. RECORD TRANSACTIONS USING DOUBLE ENTRY BOOK-KEEPING AND
PREPARE THE TRIAL BALANCE
DOUBLE ENTRY SYSTEM:
With the help of the double entry bookkeeping system, the new process of maintaining the
accounts through various techniques has been introduced. As per this system, there are two
effects of every transaction such as debit and credit and both the effects are recorded in the
books of accounts. It is the systematic system for recording financial transactions for every
business entities (Tappura et al., 2015).
There are following types of accounts to be maintained in the double entry bookkeeping
system:
Journal entries:
It is the very first book in which the transactions are being recorded that occurs daily in the
business entities. Recording the transactions in the journal in chronological order is known
as the journal entries given in the books of accounts (Carroll and Lopes, 2019).
4

Ledger accounts:
Figure 1 Leger Accounts
(Source: Orwin and Kersey, 2016)
Trial Balance:
In the trial balance the balances of the ledger accounts are being transferred which are used
to prepare the final accounts of the business entities which includes the trading account,
profit and loss account and balance sheet (Dunn, 2018).
Following are the given entries of the transactions:
IN THE BOOKS OF MR. MUHAMMAD
JOURNAL ENTRIES
Date Details L/F
no.
Debit Side
Amount (£)
Credit Side
Amount (£)
01/06/‘16 Cash a/c Dr
To Capital a/c
(Being business is being started by
65,000
65,000
5
Legder is
known as
the principle
books of
accounts
Process of
transferring
journal
entries in the
accounts
Remaining
balances are
to be carried
forward to
the following
year
Balances are
also
tranferred in
the P&L
accounts
The balance
that is found is
the difference
between the
amount of the
debit and credit
side

investing the capital)
02/06/‘16 Purchase a/c Dr
To Muhammad a/c
(Being Muhammad purchased the goods
on credit)
8,000
8,000
07/06/‘16 Cash a/c Dr
To Sales a/c
(Being one-third of the inventory sold)
4,000
4,000
08/05/’16 Purchase a/c Dr
To Bank a/c
(Being made the half payment through a
bank)
4,000
4,000
14/06/’16 Insurance Premium a/c Dr
To Bank a/c
(Being the amount of premium paid
through a bank)
75
75
15/06/’16 Stock a/c Dr
To Sales a/c
(Being the sale of inventory)
12,000
12,000
16/06/’16 Purchase a/c Dr
To Muhammad a/c
(Being purchase of goods on credit)
10,000
10,000
18/06/’16 Computer Equipment a/c Dr
To Cash a/c
(Being the purchase made of computer
equipment)
3,000
3,000
20/06/’16 Rent a/c Dr
To Bank a/c
(Being the rent of January paid through
cheque)
150
150
6

21/06/’16 Cash a/c Dr
To Sales a/c
(Being the sale of inventory)
10,000
10,000
25/06/’16 Cash a/c Dr
To Bank a/c
(Being cash withdrawal made)
100
100
30/06/’16 Stationery a/c Dr
To Cash a/c
(Being the purchase of stationery made)
30
30
IN THE BOOKS OF MUHAMMAD
LEDGER ACCOUNTS
Capital A/c
Dr Cr
Date Details J/F
no.
Amount
(£)
Date Details J/F
no.
Amount
(£)
30/06/’1
6
To balance c/f 65,000 01/06/’16 By Cash a/c 65,000
Total 65,000 Total 65,000
01/07/’16 By balance b/d 65,000
Cash A/c
Dr Cr
Date Details J/F
no.
Amoun
t
(£)
Date Details J/F
no.
Amount
(£)
01/06/’1 To Capital a/c 65,000 18/06/’16 By Computer
Equipment a/c
3,000
7

6
08/06/’1
6
To Sales a/c 4,000 30/06/’16 By Stationery
a/c
30
21/06/’1
6
To Sales a/c 10,000 30/06/’16 By balance c/f 76,070
25/06/’1
6
To Bank a/c 100
Total 79,100 Total 79,100
01/07/’1
6
To Balance b/d 76,070
Purchase A/c
Dr Cr
Date Details J/F
no
.
Amount
(£)
Date Details J/F
no.
Amount
(£)
02/06/’1
6
To Muhammad
a/c
8,000 30/06/’16 By balance c/f 22,000
08/06/’1
6
To Bank a/c 4,000
16/06/’1
6
To Muhammad
a/c
10,000
Total 22,000 Total 22,000
01/07/’1
6
To balance b/d 22,000
8

Muhammad A/c
Dr Cr
Date Details J/F
no
.
Amount
(£)
Date Details J/F
no.
Amount
(£)
30/06/’1
6
To balance c/f 18,000 By Purchase a/c 8,000
By Purchase a/c 10,000
Total 18,000 Total 18,000
01/07/’16 To balance b/d 18,000
Sales A/c
Dr Cr
Date Details J/F
no
.
Amount
(£)
Date Details J/F
no.
Amount
(£)
30/06/’1
6
To balance c/f 26,000 07/06/’16 By Cash a/c 4,000
15/06/’16 By Stock a/c 12,000
21/06/’16 By Cash a/c 10,000
Total 26,000 Total 26,000
01/07/’16 To balance b/d 26,000
Bank A/c
9

Dr Cr
Date Details J/F
no.
Amount
(£)
Date Details J/F
no.
Amount
(£)
30/06/’1
6
To balance c/f 4,325 08/06/’1
6
By Purchase a/c 4,000
14/06/’1
6
By Insurance
Premium a/c
75
20/06/’1
6
By Rent a/c 150
25/06/’1
6
By Cash a/c 100
Total 4,325 Total 4,325
01/07/’1
6
By balance b/d 4,325
Insurance Premium A/c
Dr Cr
Date Details J/F
no
.
Amount
(£)
Date Details J/F
no.
Amount
(£)
14/06/’1
6
To Bank a/c 75 30/06/’16 To balance c/f 75
Total 75 Total 75
01/07/’1
6
By balance b/d 75
10

Stock A/c
Dr Cr
Date Details J/F
no
.
Amount
(£)
Date Details J/F
no.
Amount
(£)
15/06/’1
6
To Sales a/c 12,000 30/06/’16 To balance c/f 12,000
Total 12,000 Total 12,000
01/07/’1
6
By balance b/d 12,000
Computer Equipment A/c
Dr Cr
Date Details J/F
no
.
Amount
(£)
Date Details J/F
no.
Amount
(£)
18/06/’1
6
To Cash a/c 3,000 30/06/’16 To balance c/f 3,000
Total 3,000 Total 3,000
01/07/’1
6
By balance b/d 3,000
Rent A/c
Dr Cr
Date Details J/F Amount Date Details J/F Amount
11

no
.
(£) no. (£)
20/06/’1
6
To Bank a/c 150 30/06/’16 By balance c/f 150
Total 150 Total 150
01/07/’1
6
By balance b/d 150
Stationery A/c
Dr Cr
Date Details J/F
no
.
Amount
(£)
Date Details J/F
no.
Amount
(£)
30/06/’1
6
To Cash a/c 30 30/06/’16 By balance c/f 30
Total 30 Total 30
01/07/’1
6
By balance b/d 30
TRIAL BALANCE
FOR THE MONTH JUNE’16
Details Debit
Amount
(£)
Credit
Amount (£)
Capital 65,000
Purchases & Sales 22,000 26,000
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