Financial Accounting Report: Client Transactions and Analysis

This report delves into the core principles of financial accounting, providing a comprehensive analysis of its purpose, stakeholders, and practical applications. It examines financial reporting procedures, emphasizing the importance of accurate record-keeping for internal and external stakeholders. The report includes detailed examples of journal entries, cash books, and nominal ledgers, illustrating how financial transactions are recorded and managed. Client case studies are presented to demonstrate the application of these concepts in real-world scenarios. Furthermore, the report explains the purpose of bank reconciliation statements, the reasons for discrepancies between cash book and bank statements, and the use of imprest systems. It also covers the reconciliation process for control accounts and explores the features of suspense accounts. Overall, the report provides a thorough understanding of financial accounting practices, including the preparation and interpretation of financial statements. The report includes solved assignments to aid understanding.

UNIT 10 AND FINANCIAL
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
BUSINESS REPORT......................................................................................................................1
Financial Accounting: Purpose...................................................................................................1
Stakeholders................................................................................................................................2
CLIENT 1........................................................................................................................................3
Journal Entries.............................................................................................................................3
Cash Book...................................................................................................................................5
Nominal Ledger..........................................................................................................................5
Purchase Ledger........................................................................................................................11
Trial Balance using Balance-Off Rule......................................................................................11
CLIENT 2......................................................................................................................................12
CLIENT 3......................................................................................................................................14
1. Purpose of preparing Bank Reconciliation Statement..........................................................14
2. Reason for difference between balance of bank column of cash book and bank statements14
3. Imprest...................................................................................................................................15
Application of Bank Reconciliation Process.............................................................................15
CLIENT 4......................................................................................................................................15
Process to reconcile Control Accounts.....................................................................................15
3. Control Account....................................................................................................................16
CLIENT 5......................................................................................................................................16
1. Suspense Account and its main features:..............................................................................16
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
In present business scenario, the process of preparing annual accounts that are used by
internal and external parties of business in order to make meaningful decision is knows as
financial reporting. Financial accounting procedure includes reporting of each financial dealing
so that final accounts are prepared to define the predefined objective (Barth, 2015). It is
described that reporting is primary characteristic of financial accounting that aid to define the
actual financial position and overall performance of company to stakeholders.
In this project report a complete explanation and aim of financial accounting, internal or
external stakeholders, main intent of bank reconciliation statement and control accounts. Apart
this detail description of suspense and Imprest account and its primary characteristic are
discussed in this report.
BUSINESS REPORT
Financial Accounting: Purpose
The concept of Financial Accounting is mainly concerned with keeping track of the
financial transactions undertaken by a particular business entity. This is ensured by employing
standardized guidelines on the basis of which transactions of varying nature are identified,
recorded, classified, summarised and then reported in a financial report (Bebbington, Unerman
and O’DWYER, 2014). These financial reports are usually known as Annual Reports that
contain the final accounts or statements of a business enterprise for a given time period.
The main purpose of Financial Accounting is to provision sufficient information for
various internal as well as external parties for whom such subject matter is of great importance.
This helps such parties to assess the value of company in a discrete manner and enables them to
reach important conclusions for present as well as future investment purposes. Due to this fact,
the discipline of financial accounting consists of guidelines that are generalised all around the
world in the form of Accounting Standards (AS) as well as Generally Accepted Accounting
Principles (GAAP). Apart from this, the company is also able:
 To plan and forecast its future strategic moves by analysing such information gained for a
particular accounting year.
 To ensure conformity to various standardized guidelines by maintaining proper book-
keeping systems.
1

 To measure financial performance and profitability in monetary terms.
 To facilitate important decisions in regards to taxation, liabilities and other such matters.
 To compare the performance on industrial as well as competitive lines that help the top-
management in knowing their key strengths and weaknesses.
 To identify various points of competitive advantages that are posessed by the business.
Stakeholders
Stakeholders may be defined as those parties who are largely impacted by the actions of
an organisation for various reasons. These actions mostly include policies, current as well as
future objectives among others (Bryer, 2012). Stakeholders may be internal and external. It is
important to note that not all stakeholders are equal. These have been discussed as under:
 Internal Stakeholders:
These are those parties or entities that are directly engaged within a business. For instance,
employees and board of directors are two of the main types of internal stakeholders. Employees
are those which are mainly involved in the execution of strategic goals and objectives in a
definite manner. On the other hand, Board of Directors are those who are directly involved in
the formulation and overlooking the operations so as to ensure that the predefined action plans
are carried out in a manner that result in achievement of goals. Hence, by coordinating and
cooperating together, internal stakeholders are able to carry out the operations of the business
profitably.
 External Stakeholders:
These are those parties or entities that are not directly engaged within a business. For instance,
government, customers, regulatory bodies and investors are fourof the main types of external
stakeholders. Government is one that is resposible for creation of policies that govern the
internal as well as the external business environment in which a company operates. Hence,
information derived from financial accounting can help in the ascertainment of tax sheilds and
tax liabilities in an effective manner. Customers are those stakeholders which directly impact
the profitability of the business. Hence, they are interested in knowing how transparent the
company is in its operations and whether or not it is socially aware regarding its activities
(Chiang, Nouri and Samanta, 2014). Regulatory Bodies are interested in knowing how well the
company is able to conform with the various rules and guidelines that relevant to a particular
2

organisation. Investors are interested in knowing how profitable it is for them to earn rewards in
the form of dividends from current as well as future perspective.
CLIENT 1
Journal Entries
Date Particulars..... Debit Credit
01/01/19 Premises A/c 240000
Motor Van A/c 51250
fixtures A/c 8100
Inventory A/c 23900
P Mullen A/c 4400
F Lane A/c 6100
Bank A/c 68400
Cash A/c 15600
To S Hood A/c 12150
To J. Brown A/c 16600
To Capital A/c (Balancing Figure) 389000
(Being Owner's Capital is calculated )
Therefore, Alexandra Study's Capital at 1st January
= £ 389000
Date Particulars Debit Credit
01/01/19 Storage cost A/c 450
To bank A/c 450
(Being storage cost is paid)
02/01/19 Purchases A/c 7680
To S Hood A/c 1450
To D Main A/c 2060
3

To W Tone A/c 960
To R Foot A/c 1610
(Being goods purchases on credit from various parties)
03/01/19 J Wilson A/c 1200
T. Cole A/c 1650
F. Syme A/c 2100
J. Allen A/c 1020
P. White A/c 2520
F Lane A/c 980
To Sales A/c 9470
(Being goods sold on credit to various parties)
04/01/19 Motor Expenses A/c 470
To Cash A/c 470
(Being motor expense is paid)
07/01/19 Capital A/c 1500
To Cash A/c 1500
(Being cash withdrawal by owner himself)
09/01/19 T. Cole A/c 680
J. fox A/c 1310
To Sales A/c 1990
(Being goods purchase on credit with various parties)
11/01/19 Sale Return A/c 680
To J. Wilson A/c 270
To F. Syme A/c 410
(Being goods is returned back by the parties
4

16/01/19 Bank A/c 7020
To P. Mullen A/c 1400
To F. Lane A/c 3100
To J. Wilson A/c 850
To F. Syme A/c 1670
(Being Payment received from various parties)
19/01/19 R Foot A/c 50
To Purchases Return A/c 50
(Being Goods is returned to creditor)
22/01/19 Purchases A/c 3740
To L Mole A/c 1830
To W Wright A/c 1910
(Being goods purchased on credit)
24/01/19 S Hood A/c 3600
J Brown A/c 4600
R Foot A/c 1400
To Bank A/c 6000
(Being payment is made to creditors)
27/01/19 Salaries A/c 4800
To Bank A/c 4800
(Being salaries are paid through cheque)
30/01/19 Business Rates A/c 1320
To Bank A/c 1320
5

(Being business rates are paid through cheque)
Cash Book
CASH BOOK (for the month ended January 31, 2019)
Dr.
(Receipts)
Cr.
(Payment
s)
Date
Particula
rs Cash (£) Bank (£) Date Particulars Cash (£) Bank (£)
Jan-19 Jan-19
1
To
Storage
Costs 450 4
By Motor
Expenses 470
16
To P.
Mullen 1400 7 By Drawings 1500
To F.
Lane 3100 24 By S. Hood 3600
To J.
Wilson 850 By J. Brown 4600
To F.
Syme 1670 By R. Foot 1400
By Salaries A/C 4800
By Business
Rates A/C 1320
31
To
Balance
c/f 4550 5670
balancing off
rule in trial
balance
Total 11570 6120 Total 11570 6120
Nominal Ledger
Nominal Ledger for the month ended January 31, 2019
Storage Costs A/C
6

Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
31 To Balance c/f 450 1 By Bank A/C 450
Total 450 Total 450
Motor Expenses A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
4 To Cash A/C 470 31 By balance c/f 470
Total 470 Total 470
Drawings A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
7 To Cash A/C 1500 31 By balance c/f 1500
Total 1500 Total 1500
S. Hood A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
24 To Cash A/C 3600 1 By balance b/d 12150
31 To Balance c/f 10000 2
By Purchases
A/C 1450
Total 13600 Total 13600
D. Main A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
7

31 To Balance c/f 2060 1 By balance b/d 2060
Total 2060 Total 2060
W. Tone A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
31 To Balance c/f 960 2
By Purchases
A/C 960
Total 960 Total 960
R. Foot A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
19
To Purchase
Returns A/C 50 2
By Purchases
A/C 270
24 To Cash A/C 1400
31 To Balance c/f -1180
Total 270 Total 270
J. Wilson A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
3 To Sales A/C 1200 11
By Sales
Return A/C 270
16 By Cash A/C 850
31 To Balance c/f 80
Total 1200 Total 1200
T. Cole A/C
Date Particulars (£) Date Particulars (£)
8

Jan-19 F. Syme Jan-19
3 To Sales A/C 1020 31 By balance c/f 1700
9 To Sales A/C 680
Total 1700 Total 1700
F. Syme A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
3 To Sales A/C 2100 11
By Sales
Return A/C 410
16 By Cash A/C 850
31 By balance c/f 840
Total 2100 Total 2100
J. Allen A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
3 To Sales A/C 1020 31
Bybalancing
off rule in trial
balance
balance c/f 1020
Total 1020 Total 1020
P. White A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
3 To Sales A/C 2520 31 By balance c/f 2520
Total 2520 Total 2520
F. Lane A/C
9

Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
1 By balance b/d 6100 16 By Cash A/C 1400
3 To Sales A/C 980 31 To Balance c/f 5680
Total 7080 Total 7080
J. Fox A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
9 To Sales A/C 1310 31 By balance c/f 1310
Total 1310 Total 1310
P. Mullen A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
1 By balance b/d 6100 16 By Cash A/C 1400
31 To Balance c/f 4700
Total 6100 Total 6100
L. Mole A/C
Date Particulars (£) Date
balancing off
rule in trial
balancePartic
ulars (£)
Jan-19 Jan-19
9 To Sales A/C 50 16
By Purchases
A/C 1830
10

Total 1830 Total 1830
W. Wright A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
31 To Balance c/f 1910 22
By Purchases
A/C 1910
Total 1910 Total 1910
Premises A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
1 To balance b/d 240000 31 By balance c/f 240000
Total 240000 Total 240000
Van A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
1 To balance b/d 51250 31 By balance c/f 51250
Total 51250 Total 51250
Fixtures A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
1 To balance b/d 8100 31 By balance c/f 8100
Total 8100 Total 8100
Inventory A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
1 To balance b/d 23900 31 By balance c/f 23900
Total 23900 Total 23900
Salaries A/C
Date Particulars (£) Date Particulars (£)
11

Jan-19 Jan-19
27 To Bank A/C 4800 31 By balance c/f 4800
Total 4800 Total 4800
Business Rates A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
30 To Bank A/C 1320 31 By balance c/f 1320
Total 1320 Total 1320
J. Brown A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
24 To Cash A/C 4600 31 By balance c/f 4600
Total 4600 Total 4600
Sales Ledger:
Sales Return A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
11 To J. Wilson 270 31 By Sales A/c 680
To F. Syme 410
Total 680 Total 680
Sales Ledger A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
31
To Sales
Returns A/C 680 3 By J. Wilson 1200
12

31 To Balance c/f 10780 By T. Cole 1650
By F. Syme 2100
By J. Allen 1020
By P. White 2520
By F. Lane 980
9 By T. Cole 680
By J. Fox 1310
Total 11460 Total 11460
Purchase Ledger
Purchase Returns A/C
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
31
To Purchases
A/C 50 19
By R. Foot
A/C 50
Total 50 Total 50
Purchase Ledger
Date Particulars (£) Date Particulars (£)
Jan-19 Jan-19
2 To S. Hood 1450 31
By Purchase
Returns A/C 50
To D. Main 2060 31 By Balance c/f 6030
To W. Tone 960
To R. Foot 1610
Total 6080 Total 6080
Trial Balance using Balance-Off Rule
Trial Balance (for the month ended January 31, 2019)
13

S. No. Particulars Debit Amount (£) Credit Amount(£)
1 Premises 240000
2 Van 51250
3 Fixtures 8100
4 Inventory 23900
5 Receivables: P. Mullen 4700
F. Lane 5680
J. Wilson 80
T. Cole 1700
F. Syme 840
J. Allen 1020
P. White 2520
J. Fox 1310
6 Cash at Bank 6120
7 Cash in Hand 7520
8 Purchases 6080
9 Purchase Returns 50
10 Sales 11460
11 Sales Returns 680
12 Salaries 4800
13 Motor Expenses 470
14 Storage Costs 450
15 Business Rates 1320
16 Drawings 1500
17 Payables: S. Hood 10000
D. Main 2060
W. Tone 960
R. Foot 160
14

W. Wright 1910
J. Brown 4600
L. Mole 1780
18
Alexandra's Capital
(balancing figure) 318980
Total 361000 361000
CLIENT 2
Statement of Profit and Loss for the year ended 31st December 2018
Particulars Amount Particulars Amount
To opening inventory 15000 By Sales 138000
To Purchases 61000 Less: Return Inward 3000 135000
Less: Return Outward 1500 59500 By Closing Inventory 20000
To Gross profit 80500
Total 155000 Total 155000
To Administration Cost 32000 By Gross Profit 80500
To Distribution Cost 32000
To Depreciation 8800
To Finance Cost 1500
To Tax 2000
To Net Profit 4200
Total 80500 Total 80500
Statement of financial position of as at 31st December 2018
Assets Amount in EUR
Land 20000
Building 40000
Less: Accumulated Depreciation 10000
30000
15

Depreciation for the year 800 29200
Plant and machinery 60000
Less: Depreciation 20000
40000
Depreciation for the year 8000 32000
Total non-current assets 81200
Inventories 20000
Prepaid Rent 3000
Accounts receivable 26000
Total current assets 49000
Total assets 130200
Equity and liabilities
Share capital 40000
Share premium 20000
Retained Earnings including current year profit 26200
Equity 86200
Current and other tax liabilities 2000
Accrued salaries 2000
Bank Overdraft 18000
Accounts payable 22000
Total current liabilities 44000
Total equity and liabilities 130200
Accounting Concepts: Consistency and Prudence:
Accounting Concepts: This is related to conventions which helps to create an essential
guidelines for preparing financial reports.
Consistency: With the help of this effective policies and methods of accounting,
practices followed, accounting principles from one accounting period to another.
16

Prudence: This accounting concept is needed by company to record every liability and
expense that happen in a year and record income in case if it actually attained (Christensen,
Nikolaev and Wittenberg‐Moerman, 2016).
Purpose of depreciation in formulating accounting statement:
The primary ground of giving depreciation to distribute the total cost of asset all over the
helpful life of asset in order to define the actual revenues earned by those assets. It also describe
the decrease to the value of fixed asset owed to physical wear and tear. Some method are
discussed below:
a. Written Down Method: This method of depreciation uses a specific percentage that is
implement by business to measure value of calculate depreciation. Under this method in initial
year depreciation is provided on original cost whereas in subsequent year depreciation is
calculated on written down value
b. Straight Line Method: With the help of this depreciation method company use to charges
only cost equally to the entire life of fixed asset. This method also support in cases where
economical welfare from an asset.
CLIENT 3
1. Purpose of preparing Bank Reconciliation Statement
Bank reconciliation statement is like a essential tool for business organisation to trace or
identify any difference between bank statements balance and balance of bank in cash book (De
Waegenaere, Sansing and Wielhouwer, 2015). It is used by accountants to asses the amount of
variation in bank statements and cash book balance.
2. Reason for difference between balance of bank column of cash book and bank statements
Following are some major reason for difference between balance of bank column of cash
book and bank statements, as follows:
 Outstanding charges
 Cheque dishonoured
 Check printing charges
 Deposit in transit
 Cheque issued but not presented
17

3. Imprest
It a type of financial accounting system, in which funds are accumulated by business
organisation to pay its small and penny expenses in order to enhance accountability.
Application of Bank Reconciliation Process
Particulars Amount
Bank Balance as per pass book 398
Add: Items having effects of higher balance in cash book
 Bank charges not recorded in cash book...... 36
 Adjustment for direct debit rates.............. 105
Less: Items having effects of lower balance in cash book
Payments to:
 C David 122
 S Leeming 116
 C Lyons 87
Bank balance as per cash book 214
CLIENT 4
Process to reconcile Control Accounts
Sales Ledger Control A/c
Particulars Amount
(£)
Particulars Amount
(£)
Balance b/d 12600 Sales Return 4320
Credit Sales 152350 Bad Debts 1600
Discount Allowed 1060
Bank/ Cash (Receipt from credit
customers)
120610
Set-off (Transfer to purchase
ledger)
640
Balance c/d 36720
Total 164950 Total 164950
18

Balance b/d 36720
Purchase Ledger Control A/c
Particulars Amount
(£)
Particulars Amount
(£)
Discount Received....... 850 Balance b/d............ 11360
Purchase Return.......... 3110 Credit Purchase................... 126500
Bank/ Cash (Payment to
suppliers)..............
91010 Bank (Refund from
supplier).............
500
Set-off (Transfer from sales
ledger)............
640
Balance c/d.......... 42750
Total 138360 Total 138360
Balance b/d 42750
3. Control Account
Control account is summary account which contains amount and balance of various
accounts of subsidiary ledger accounts (Kothari and Lester, 2012). Main objective of suspense
account is to record all general ledgers and provide summary balances of all accounts to prepare
financial statement.
CLIENT 5
1. Suspense Account and its main features:
Suspense account refers to a general ledger account in which amounts and values are
recorded on temporary basis. It is mainly used when relevant general ledger account for specific
transactions can not be determined while recording transaction. Amount of suspense account is
moved in right account at the time of preparation of financial accounts (Narayanaswamy, 2017).
Following are some features of suspense account:
 It assist in identification and allocation of error.
 It also help to trace duplication of entries. It help in classification of error by their nature and extent.
19