Financial Accounting Assignment: Ray Finance Limited Analysis

This financial accounting assignment, prepared for Ray Finance Limited, delves into various aspects of financial bookkeeping. It begins with an introduction to financial accounting, followed by an analysis of business transactions, including cash and credit transactions, and the application of single and double-entry bookkeeping systems. The assignment includes journal entries, ledgers, and the preparation of a trial balance. Furthermore, it identifies the major differences between financial reports and financial statements, emphasizing their importance for stakeholders. It also explains fundamental accounting principles. The assignment then proceeds to Task 2, which covers bank reconciliations, control accounts, and suspense accounts, along with the preparation of a cash book and a bank reconciliation statement. The document includes journal entries, ledgers, and the preparation of a trial balance. Finally, the assignment concludes with a comprehensive set of references.

Financial Accounting

Contents
INTRODUCTION...........................................................................................................................3
TASK1.............................................................................................................................................3
Question 1. Identification of business transaction and their type also discussion about the
single entry and double entry system of bookkeeping buy land in term of trial balance.......3
Question 3: Identify major differences in financial reports and statements and why these are
important for various stakeholders?.......................................................................................8
Question 4: explain different fundamental principles of accounting...................................10
Question 5:Prepare a profit and loss account for the year ended 31 December 2017 and
balance sheet at that date......................................................................................................10
TASK2...........................................................................................................................................12
Question1: What is meant by bank reconciliation and why is it required? How is this
achieved? Why is this necessary?.........................................................................................12
Question 2: what are control accounts? Explain the role of control accounts in financial
management..........................................................................................................................13
Question 3: what is suspense account? What are the reasons for drafting suspense accounts?
..............................................................................................................................................13
Question 3 prepare cash book...............................................................................................14
Question 4 Prepare a bank reconciliation statement.............................................................14
REFRENCES.................................................................................................................................16
Books and journal..........................................................................................................................16

INTRODUCTION
Financial bookkeeping can be defined as a combination of different account and financial
information which are related to development of a proper system by the organisation with the
help of tools and techniques related to accounting and business records for analysing and
interpreting information and using it for the further benefit. In this report which is an
organisation is Ray finance limited. Present report have been considered, the sense and concept
of journal entries, how they apply in the organization their use in formulating trial balance and
financial statements. This reports their discussion about the importance and maintenance of trial
balance and various accounts which are required to the organisation for controlling its cash flow
and bank reconciliation statement. is also discussion about how the bank reconciliation statement
are prepared by the organisation and how it can be used in day to day operations and activities of
the firm.
TASK1
Question 1. Identification of business transaction and their type also discussion about the single
entry and double entry system of bookkeeping buy land in term of trial balance.
Commercial transaction: It includes those activities or deals which measure in monetary
term and indirectly affect processes of business. There dealings direct affect on assets, liabilities,
expense and income of the business organization. Business transactions are the activity which is
related with business and record in periodicals of the organization. The transactions rare divided
into 2 parts which are Cash transactions and credit business transaction(Nicholls and Mastrolia,
2015).
Cash transaction: Activities which are related to flow of cash inward and outward. It
includes sales, purchase, purchase of investment etc.
Credit deal: It considered that kind of activities in which there is no need of cash at the
time when transaction incurred. Examples, goods purchase on credit, stock sold on credit,.
These transaction directly as credit purchase increase obligation of organization and affect on
asset and liability and decent sold on praise enhance the possessions of the organization
Internal and External deals: Theses deal has separate part. .
External deal: It is related with activities which are related with external parties. Business
dealings, purchase of assets, issuing shares, purchase raw material etc.

Internal transaction: Theses are non enhance transactions . In internal transactions only internal
parties of business are involved. It does not considered transactions which are related with
exchange of good. There are different Internal transaction considered, devaluation charge on
secure asset, repayment loss of asset as due to on fire.
Single entry book keeping: Under single entry accounting system organisation has to
record each and every transaction on the basis of proper record with the financial information.
this is the transaction is recorded from the one side which also generate the incomplete
transactions. System of accounting is used by sole proprietor firm where the organisation has no
legal authority apply this system. is completely different from double entry system where the
ride it of the transactions are recorded for each and every transaction. (Elefterie and Badea, ,
2016).
Double entry accounting system: In this system of accounting transaction or business
activities are record on 2 sided thus it is known as double entry book keeping system. According
to the rules, every business transaction have 2 sided effects, it affect asset and liabilities also.
Every transaction is recorded in debit or credit side. This is the official and authorise format of
recording entry which is applicable in the entire world as it precedes base for formulating
financial statement and the whole accounting system is based on book keeping it is the source of
staring of recording all the transaction of business (Mangala, and Kumari, 2017).
Trail balance: It is statement which show list of all account related wit business transactions
which contains in the books of ledger statements. In this all accounts with their balance have
been show in debit or credit side of the statement. In other words trial balance is the format
which is formulated at the end of the account years to identify the debit and credit balance of the
accounts with the help of leader Import in context of trial balance.
Manager of organization use trial balance to identify the debit and credit balance of accounts.
It is useful to organtional in finding out error during journal entry.
It is help in providing basic for formation of financial statement.
Auditors use it as base of recordings.
Trail balance help in deifying the end balance.
It is provides various mathematical impartialities which are associated with debit and credit side
of accounts.

It is used in finding out the absent quantity and also uses to reduce the different of asset and
accountabilities side.
Question 2
1. Journal entries
Date Particulars CR DR
01/06/16 Cash a/c DR
To capital a/c
65000
65000
02/06/16 Purchase a/c DR
To accounts payable a/c
8000
8000
07/06/201
6
Cash a/c DR
To sales a/c
4000
4000
08/06/16 Accounts payable a/c DR
To bank a/c
4000
4000
14/06/201
6
Insurance expense a/c DR
To bank a/c
75
75
15/06/16 Accounts receivable a/c DR
To sales a/c
12000
12000
16/06/16 Purchase a/c DR
To accounts payable a/c
10000
10000
18/06/16 Computer equipment a/c DR
To cash a/c
3000
3000
20/06/16 Rent a/c DR
To bank a/c
150
150
21/06/16 Cash a/c DR
To sales a/c
10000
10000
25/06/16 Cash in hand
To bank a/c
100
100

30/06/16 Stationary a/c DR
To cash in hand a/c
30
30
(2) Ledgers:
Cash a/c
Date Particulars J
F
Amount Date Particulars J
F
Amount
01/06/
16
To capital a/c 65000 18/06
/16
By Computer equipment
a/c
3000
07/06/
16
To sales a/c 4000 31/06
/16
By balance c/d 76000
21/06/
16
To sales a/c 10000
79000 79000
Capital a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
31/0
6/16
To balance c/d 65000 01/
06/
16
By cash 65000
65000 65000
Purchase a/c
Date Particulars J Amount Dat Particulars J Amount

F e F
02/0
6/16
To accounts payable a/c 8000 31/
06/
16
By balance c/d 18000
16/0
6/16
To accounts payable a/c 10000
18000 18000
Accounts payable a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
08/0
6/16
To bank a/c 4000 02/
06/
16
By purchase 8000
31/0
6/16
To balance c/d 14000 16/
06/
16
By Purchase a/c 10000
18000 1800
Sales a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
31/0
6/16
To balance c/d 26000 07/
06/
16
By Cash a/c 4000
15/ By Accounts receivable 12000

06/
16
a/c
21/
06/
16
By Cash a/c 10000
26000 26000
Bank a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
31/0
6/16
To balance c/d 4325 08/
06/
16
By Accounts payable a/c 4000
14/
06/
16
Insurance expense a/c 75
20/
06/
16
Rent a/c 150
25/
06/
16
Cash in hand 100
4325 4325
Insurance a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
14/0 To bank 75 31/ By balance c/d 75

6/16 06/
16
75 75
Account receivable a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
15/0
6/16
To sales a/c 12000 31/
06/
16
By balance c/d 12000
12000 12000
Computer a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
18/0
6/16
To cash a/c 3000 31/
06/
16
By balance c/d 3000
3000 3000
Rent a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
20/0
6/16
To bank a/c 150 31/
06/
16
By balance c/d 150
150 150

Cash in hand a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
25/0
6/16
To bank a/c 100 30/
06/
16
By stationary 30
31/
06/
16
By balance c/d 70
100 100
Stationary a/c
Date Particulars J
F
Amount Dat
e
Particulars J
F
Amount
30/0
6/16
To Cash in hand a/c 30 31/
06/
16
By balance c/d 30
30 30
(3) Trial balance:
Particulars DR CR
Cash a/c 76000
Capital a/c 65000
Purchase a/c 18000
Accounts payable a/c 14000
Sales a/c 26000

Bank a/c 4325
Insurance a/c 75
Account receivable a/c 12000
Computer a/c 3000
Rent a/c 150
Cash in hand a/c 70
stationary a/c 30
Total 109325 109325
Question 3: Identify major differences in financial reports and statements and why these are
important for various stakeholders?
It is important for Ray finance limited used tools of financial accounting in order to
identify performance in relation the business for this purpose they prepared financial report and
statement. Both are the part of financial accounting but there are difference which describe
below
Particular Financial report Financial statement
Definition Financial reports are the
reports which is formulated to
show the financial position of
the organization to its users.
Theses statement are
formulate to identify the value
of profit and strength and
obligations of the organization
Aim It is meant to help
stakeholders in getting
information about various
products
Us financial data to assess
prior performance ad probable
future presentation to make
decision
Tools It includes cash flow, fund
movement, and parts of
financial statements.
It considers profit and loss
explanation and balance sheet.
Range Financial report as wider area
and financial statement are
Financial statement has
narrow area as compare to

part of it financial reports.
Requirement of financial report: it can be define as that standard practices which organization
proved accurate information to the users of company . Following are the requirement of finance
report(Chhabra, and Pattanayak, 2014).
Financial reports are use to provide article as proof.
It is useful in analysing financial performance of the business organization.
It helps in tracking period ad managements of obligation
With use of financial report manager take decision regarding future business policies
Back and other financial institution give loan to organization on the basis of checking financial
reports of the organization
It is useful in identify real cash inflow and out flow activities.
With the use of financial report Ray finance limited will be able to compare their performance
with rival companies.
It helps in taking division regarding given incentive future business project.
There are two types of users of financial reports
Internal users: These includes member which are belongs with part of business
organization, which help in running business activities
Management department: They are help in formulating policies and taking decision
regarding business activities. They use financial reports for caging strategies and take decision
regarding expansion of business
Employees: They are parson which engaged in performing business activities. They are
directly interest in financial report as by analysis the report they make sure regarding their job
security, profit and incentive organization given to them.
External users: Those users which are not part of organization but indirectly internal to
the business are external users (Klein, 2015).
Investors: Define as those persons were directly related to the organisation and help firm
in fulfilling the financial requirement because these individuals invest in the different policies of
the organisation so that form can perform its various activities.