Financial Accounting Principles Report: Financial Statement Analysis

This report provides a detailed analysis of financial accounting principles, focusing on the preparation and interpretation of financial statements. It begins with an introduction to financial accounting and its purposes, emphasizing the importance of financial reporting for stakeholders, including internal (owners, employees) and external (government, suppliers, consumers, investors, creditors) parties. The report then delves into practical applications through client-based examples, covering journal entries, ledgers, and trial balances for Alexandra Study. It also discusses accounting concepts such as consistency and prudence, and the purpose of depreciation. Furthermore, the report explores bank reconciliation statements, control accounts, and the use of suspense accounts. The report examines the P&L account of Munteanu Ltd., highlighting the significance of financial information in decision-making and the overall financial health of a business, demonstrating the practical application of accounting principles in real-world scenarios.

Financial Accounting
Principles

Table of Contents
INTRODUCTION...........................................................................................................................1
BUSINESS REPORT ...................................................................................................................1
(a) Financial Accounting & its purposes.....................................................................................1
(b) Internal and external stakeholders..........................................................................................2
CLIENT 1........................................................................................................................................3
1. Journal Entries & Ledger in the book of Alexandra Study......................................................3
2. Trial Balance as on 31/01/2019 in the books of Alexandra Study........................................11
CLIENT 2......................................................................................................................................13
3. Consistency & Prudency........................................................................................................15
4. Purpose of depreciation in formulating accounting Statement..............................................16
CLIENT 3......................................................................................................................................17
1. Purpose of BRS......................................................................................................................17
2. Difference among balance of bank column of cash book & bank statements.......................17
3. Imprest...................................................................................................................................17
4. BRS as on 30/09/ 2018..........................................................................................................18
CLIENT 4......................................................................................................................................18
1. Sales Ledger Control Account ..............................................................................................18
2. Purchase Ledger Control a/c .................................................................................................19
3. Control Account.....................................................................................................................19
CLIENT 5......................................................................................................................................20
1. Suspense A/C & its main features ........................................................................................20
2. Trial Balance..........................................................................................................................20
3. Journal Entries.......................................................................................................................20
CONCLUSION..............................................................................................................................21
REFERENCES..............................................................................................................................22

INTRODUCTION
Financial accounting is the field of accounting concerned with the summary, analysis &
reporting of financial transactions pertaining to a business. All corporations have to prepare
financial statements for a specific period of time and financial reports have present in front of
stakeholders. It is helpful for the organisation to take effective decisions regarding investment as
well as expansion. Financial statements shows the financial position of the corporation. To better
understand this concept Airdri Limited has been selected which deals in electronic components
and it belongs to United Kingdom. In this report, there are following topics are covered such as:
financial accounting & its purposes, analysis of internal and external stakeholders, trail balance ,
balance sheet, final accounts for sole traders, accounting concepts related to consistency &
prudency. Apart from this it also discuss about purposes of preparing bank reconciliation
statements and sales & purchase control ledger.
BUSINESS REPORT
(a) Financial Accounting & its purposes
All companies have to prepare final books of accounts during a financial year so that it
can know the financial position of the business. Financial accounting involves recording,
summarizing, analysing and classifying the transactions which are recorded in the books of
accounts of organisation. The Junior accountant helps to manage financial records of Airdri
Limited so that true and fair information can be provided which provide help to take important
decisions for the benefit of corporation. It involves income statement, balance sheet and cash
flow statement. This financial report are the part of formal report & provided to the internal as
well as external stakeholders of the company. An accountant have to follow different rules,
regulations, principles and policies which are related to financial accounting. The main purpose
of preparing financial statements are describe below:
 To provide important financial information to various parties such as: creditors,
investors, taxation authorities and government (Pongoh, 2013).
 It provide useful financial information to the company which help to take investment as
well as expansion decisions for the growth of company.
 Organisation can know its true financial position during a specified period of time
period.
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 Ledger books of accounts classify the information and data as per its nature where as
cash & credit transactions has shown separately.
 Financial statement shows the financial position of company which attract the investors
to invest in the projects of organisation.
So there are various purposes to prepare financial statements of the corporation and it is
necessary for the organisation to prepare it in every financial year.
(b) Internal and external stakeholders
Stakeholders can be an individual, group or corporation that has concern or interest in the
company. They can affect or to be affected by the actions or policies of the organisation. There
are two types of stakeholder which are internal and external stakeholder. Internal stakeholders
involves owners & shareholders, workers etc. Where as external stakeholders involves suppliers,
government, investors, consumers etc. The business decisions of a company can impact the
stakeholders and its investment decision. It is beneficial for the Airdri Limited to take effective
financial decisions which attract the stakeholders to invest in the organisation as a result
maximum funds can be generated by the corporation. Classification of different types of
stakeholders are describe as below:
Internal stakeholders:
Owners & Shareholders: These persons are those which can influence by the financial
decisions of company. Owners & shareholders are those persons who invest their funds in the
company in the form of investment and organisation use their funds in the expansion project so
that business of corporation can grow and generate higher returns. As a result company can earn
maximum profits. Before taking investment decisions they look financial position and on the
basis of it they take investment decisions (Pongoh, 2013).
Employees: These are those persons who work for the company and perform their roles
and responsibilities as per the need of organisation so that it can achieve its objectives and goals.
They are directly related with the corporation and its performance and if financial position of
company is good than there are more chances that salaries and wages of workers get increase.
Airdri Limited has effective employees who perform to meet the objectives and targets of
corporation and contribute in its growth.
External stakeholders: There are different types of stakeholders which are describe as
below:
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Government : The government has plays the role of stakeholders because it collect the
taxes on the income which is earn by organisation. It also invest in the business of corporation to
generate more returns. There are various rules, regulations and compliances have to be followed
by the company which imposed by the government authorities.
Suppliers: These are those persons who supply the raw material to the organisation so
that it can manufacture the products for the final purpose of sale. The suppliers of Airdri Limited
has provide quality raw material at reasonable price so that company can produce quality
products and satisfy the needs of consumers. Corporation also give payment time to time as per
the quantity and cost of material.
Consumers: These are those persons who purchase the products and services of
company on the basis of consideration. It is the responsibility of organisation to satisfy the needs
of consumers and Airdri Limited has provide quality products at reasonable price so that demand
of customers can be fulfilled. A corporation can grow and get success when it satisfy the desires
of consumers (Mande and Ammani, 2013).
Investors : These are those persons who invest in the business of organisation for the
purpose to generate maximum returns. For a company it is necessary to make action plan which
attract the investors to invest in the project of corporation. It is beneficial for the Airdri Limited
to collect huge funds from them and expand its business for the purpose to earn higher profits.
Before taking investment decisions they look financial position and on the basis of it they take
investment decisions.
Creditors: These are those persons who provide money to the company and
organisation have to give interest to the creditors. It involves banks, bondholders, suppliers etc. If
corporation have shortage of funds than it borrow money from the creditors and pay time to time
interest to them. Creditors take the information form the financial statements of organisation and
on the basis of it they take decision that how munch money they have to lend to the company.
CLIENT 1
1. Journal Entries & Ledger in the book of Alexandra Study
SALES DAY BOOK
DATE Particulars £
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03/01/18 J Wilson 1,200
T Cole 1,650
F Syma 2,100
J Allen 1,020
P White 2,520
F Lane 980
09/01/18 T Cole 680
J FOX 1,310
Cr. in sales a/c in Nominal Ledger 11,460
PURCHASES DAY BOOK
DATE Particulars £
02/01/18 S.Hood 1,450
D Main 2,060
W.Tone 960
R Foot 1,610
22/01/18 L Mole 1,830
W Wright 1,910
Dr. Purchases a/c in Nominal Ledger 9,820
PURCHASES RETURNS DAY BOOK
DATE Particulars £
19/01/18 R Foot 50
Credit P/R a/c
in Nominal Ledger 50
SALES RETURNS DAY BOOK
DATE Particulars £
11/01/18 J Wilson 270
F Syma 410
Debit S/R a/c
in Nominal Ledger 680
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Ledger
5

6

7

8

9