Financial Accounting Project: Trial Balance, Statements, and Ratios

This financial accounting project comprehensively addresses key aspects of financial accounting, starting with the creation of a trial balance as of March 31, 2020, and its subsequent updates for April 30, 2020, including journal entries and ledger postings. The project then delves into the preparation of various financial statements, such as the statement of profit and loss account for the year ending March 31, 2020, and the balance sheet as of the same date, providing a clear depiction of the company's financial performance and position. Furthermore, the project incorporates ratio analysis to evaluate the company's financial health, covering profitability, efficiency, and solvency. A significant portion of the project is dedicated to bank reconciliation, which includes reconciling differences between the company's cash book and bank statements, along with updating the cash book and preparing a bank reconciliation statement. The project concludes with a comprehensive overview of financial accounting principles and practices, offering valuable insights into the recording, summarizing, and interpreting of financial data.

FINANCIAL ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK- 1...........................................................................................................................................1
1.1 Trial balance as at 31st March 2020......................................................................................1
1.2 Recording, posting and preparation of the trial balance as at 30th April 2020.....................1
1.3 Accounts ending up in the different financial statements......................................................9
TASK- 2.........................................................................................................................................10
2.1 Types of financial statements...............................................................................................10
2.2 Statement of profit and loss account for the year ended 31st march 2020..........................10
2.3 Balance sheet as at 31st March 2020...................................................................................11
2.4 Ratio analysis.......................................................................................................................12
TASK- 3.........................................................................................................................................13
3.1 Bank reconciliation..............................................................................................................13
3.2 Updating the cash book........................................................................................................14
3.3 Bank reconciliation statement..............................................................................................14
TASK- 4.........................................................................................................................................15
4.1...............................................................................................................................................15
4.2...............................................................................................................................................16
4.3...............................................................................................................................................16
4.4...............................................................................................................................................17
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Financial accounting is the important function in a business which shall assist in
recording, summarising and interpreting the financial statements of the company. This shall help
in providing the true and fair view of the business performance. In the current project certain
tasks will show the procedure of financial accounting that is undertaken by the business in the
routine operations. It shall be demonstrating the recording, ledger posting, preparation of trial
balance, statement of profit and loss account for the profitability and the balance sheet for
ascertaining the financial position. It shall also represent the reconciliation of the errors that are
undertaken or due to the difference in the balances of the different books of account.
TASK- 1
1.1 Trial balance as at 31st March 2020
PARTICULARS DEBIT £ CREDIT £
Premises 340000
Van 51250
Fixtures 8100
Inventory 63900
Receivables
P Mullen 1400
F Lane 3100
Cash in hand 62400
Cash at bank 5600
Payables
S Hood 2150
J Brown 4600
Capital 529000
Total 535750 535750
1.2 Recording, posting and preparation of the trial balance as at 30th April 2020
Journal Entries:-
DATE PARTICULARS DEBIT CREDIT
01/04/20 Storage costs A/c dr 400
To Bank A/c 400
(Being the storage expenses paid by cheque)
02/04/20 Purchase A/c dr. 5000
1

To S Hood A/c 1400
To D Main A/c 2000
To R Foot A/c 1600
(Being goods bought on credit)
03/04/20 T Cole A/c dr. 1650
F Syme A/c dr. 2000
J Allen A/c dr. 900
F Lane A/c dr. 750
To Sales A/c 5300
(Being goods sold on credit)
04/04/20 Motor expenses A/c dr. 470
To Cash A/c 470
(Being motor expenses paid in cash)
07/04/20 Drawings A/c dr. 1500
To Cash A/c 1500
(Being drawings made by the owner for his personal
use)
09/04/20 T Cole A/c dr. 650
J Allen A/c dr. 1300
To Sales A/c 1950
(Being goods solsd on credit)
14/04/20 Van A/c dr. 28500
To Abel Motors A/c 28500
(Being Van purchased on credit)
16/04/20 Bank A/c dr. 6500
To P Mullen A/c 1400
To F Lane A/c 3100
To F Syme A/c 2000
(Being dues recovered from the trade receivables)
22/04/20 Purchase A/c dr. 1800
To D Main A/c 1800
(Being the goods bought on credit)
24/04/20 S Hood A/c dr. 2150
J Brown A/c dr. 4600
R Foot A/c dr. 1400
To Cash A/c 8150
(Being due balances paid by the owner)
2

27/04/20 Salaries A/c dr. 4800
To Bank A/c 4800
(Being salaries paid by cheque)
30/04/20 Business rates A/c dr. 1320
To Bank A/c 1320
(Being business rates paid by cheque)
31/04/20 Abel Motors A/c dr. 28500
To Bank A/c 28500
(Being Abel Motors paid by cheque)
Ledger Accounts:-
Storage costs account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
01/04/20
To Bank
A/c 400 31/4/20
By Profit
and loss
A/c 400
400 400
Bank account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
01/04/20
To balance
b/d 5600 01/04/20
By Storage
costs A/c 400
16/04/20
To P
mullen A/c 1400 27/04/20
By Salaries
A/c 4800
16/04/20
To F Lane
A/c 3100 30/04/20
By
Business
rates A/c 1320
16/04/20
To F syme
A/c 2000 31/4/20
By Abel
Motors A/c 28500
31/4/20
To balance
c/d 25720
35020 35020
Purchase account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
02/04/20 To S Hood 1400
3

A/c
02/04/20
To D Main
A/c 2000
02/04/20
To R Foot
A/c 1600
22/04/20
To D Main
A/c 1800 31/4/20
By Profit
and loss
A/c 6800
6800 6800
S. Hood account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
24/04/20
To Cash
A/c 2150 01/04/20
By balance
b/d 2150
31-4-20
To balance
c/d 1400 02/04/20
By
Purchase
A/c 1400
2150 2150
D. Main account
Date Particulars J.F. Amount Date
Particular
s J.F. Amount
02/04/20
By
Purchase
A/c 2000
31/4/20
To balance
c/d 3800 22/04/20
By
Purchase
A/c 1800
3800 3800
R. Foot account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
24/04/20
To Cash
A/c 1400 02/04/20
By
Purchase
A/c 1600
31/4/20
To balance
c/d 200
1600 1600
4

T. Cole account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
03/04/20
To Sales
A/c 1650
09/04/20
To Sales
A/c 650 31/4/20
By balance
c/d 2300
2300 2300
F. Syme account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
03/04/20
To Sales
A/c 2000 16/04/20
By Bank
A/c 2000
2000 2000
J. Allen account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
03/04/20
To Sales
A/c 900
09/04/20
To Sales
A/c 1300 31/4/20
By balance
c/d 2200
2200 2200
F. Lane account
Date
Particula
rs J.F. Amount Date
Particular
s J.F. Amount
01/04/20
To
balance
b/d 3100 16/04/20
By Bank
A/c 3100
03/04/20
To Sales
A/c 700 31-4-20
By balance
c/d 700
3100 3100
Sales account
5

Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
03/04/20
By T Cole
A/c 1650
03/04/20
By F Syme
A/c 2000
03/04/20
By J Allen
A/c 900
03/04/20
By F Lane
A/c 700
09/04/20
By T Cole
A/c 650
31/4/20
To Profit
and loss
A/c 7200 09/04/20
By J Allen
A/c 1300
7200 7200
Motor expenses account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
04/04/20
To Cash
A/c 470 31/4/20
By Profit
and loss
A/c 470
470 470
Cash account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
01/04/20
To balance
b/d 62400 04/04/20
By Motor
expenses
A/c 470
07/04/20
By
Drawings
A/c 1500
24/04/20
By S Hood
A/c 2150
24/04/20
By J
Brown A/c 4600
24/04/20
By R Foot
A/c 1400
31-4-20
By balance
c/d 52280
6

62400 62400
Drawings account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
07/04/20
To Cash
A/c 1500 31/4/20
By balance
c/d 1500
1500 1500
Van account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
01/04/20
To balance
b/d 51250 31/4/20
By balance
c/d 79750
14/04/20
To Abel
motors A/c 28500
79750 79750
Abel motors account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
31/4/20
To Bank
A/c 28500 14/04/20
By Van
A/c 28500
28500 28500
P Mullen account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
01/04/20
To balance
b/d 1400 16/04/20
By Bank
A/c 1400
1400 1400
J Brown account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
24/04/20
To Cash
A/c 4600 01/04/20
By balance
c/d 4600
7

4600 4600
Salaries account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
27/04/20
To Bank
A/c 4800 31/4/20
By Profit
and loss
A/c 4800
4800 4800
Business rates account
Date
Particular
s J.F. Amount Date
Particular
s J.F. Amount
30/04/20
To Bank
A/c 1320 31/4/20
By Profit
and loss
A/c 1320
1320 1320
Trial Balance:-
Particulars Debit Credit
Premises 340000
Fixture 8100
Capital 529000
Storage cost 400
Bank overdraft 25720
Purchase 6800
S Hood 1400
D Main 3800
R Foot 200
T Cole 2300
F Syme 0
J Allen 2200
F Lane 700
Sales 7200
Motor expenses 470
8

Cash 52280
Drawings 1500
Van 79750
Abel Motors 0
P Mullen 1400
J Brown 4600
Salaries 4800
Business rates 1320
Inventory 63500
568720 568720
1.3 Accounts ending up in the different financial statements
Income Statement Balance Sheet
Storage cost Premises
Purchase Fixture
Sales Capital
Motor expenses Bank overdraft
Salaries S Hood
Business rates D Main
Opening Inventory R Foot
T Cole
F Syme
J Allen
F Lane
Cash
Drawings
Van
Abel Motors
P Mullen
J Brown
9

TASK- 2
2.1 Types of financial statements
 Balance Sheet- The balance sheet of the company is the most important financial
statement for the business which discloses its financial position and the financial health
and well-being of the business. It contains the various assets that are owned in the name
of business and the various liabilities that are owed by the business. Nowadays the
balance sheet of the company is prepared in the vertical format wherein firstly all the
assets of the entity are shown and the nextly the liabilities and the capital contribution to
the business. The balance of both the asset side and the liability side of the balance sheet
always matches proving the double entry system of accounting (Robson, Young and
Power, 2017).
 Income Statement- The income statement of the business shall be representing the
profitability and the operational efficiency of the business. It shall be recording all the
incomes and expenses of the business which are accrued for the company (Yu, Lin and
Tang, 2018). They follow the matching principle of accounting whereby all the incomes
and expenses that are pertaining to the particular period shall be recorded in the same
time and not when it is paid or received. It is important as t facilitates the various
decisions of the external and internal users of the business.
 Cash flow statement- The cash flow statement of the company shall be accounting for
all the cash inflows and outflows that have been undertaken in the current period of
accounting. They shall be effectively representing the liquidity position of the business
which is essential to know the capacity of the business to meet the short term obligations
of the business. The transactions of cash-flows are divided into three parts one is
operating activities, the other is investing activities and the last is financing activities.
2.2 Statement of profit and loss account for the year ended 31st march 2020
Particulars Amount
Revenue from operations 198000
Less: Cost of goods sold -100000
Opening inventory 12000
Add: Purchases 102000
Less: Closing inventory -14000
10