Financial Accounting Report: Financial Accounting Part 1 Analysis

This report provides a detailed analysis of financial accounting principles and practices. It begins with an introduction to the importance of finance and financial accounting, emphasizing the use of double-entry bookkeeping systems. The report explains the process of recording transactions using debits and credits, including journal entries and the preparation of trial balances. It then moves on to the formulation of financial statements, covering both profit and loss statements and balance sheets. Furthermore, the report differentiates between the preparation of financial statements for sole traders and limited companies, offering examples and insights into each. The conclusion summarizes the key takeaways, highlighting the effectiveness of financial accounting in organizational analysis. The report is structured into two main tasks, with each task covering different aspects of financial accounting. The report provides a good understanding of the fundamental concepts of financial accounting and its practical application.

Financial Accounting
Part 1

TABLE OF CONTENTS
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1: Double entry bookkeeping system of debits and credits..................................................1
P2: Preparation of trail balance..............................................................................................6
TASK 2............................................................................................................................................7
P3: Formulation of financial statements.................................................................................7
P4: Preparation of financial statements for sole trader and limited companies.....................8
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Finance is considered as life blood of the company. Most of the time an organisation used
to prefer resources utilisation by the help of using numerous funds and capital. Financial
accounting is an important area of finance that is concerned with overall summary, analysis and
reporting of different types of transactions those are done in an accounting period. This project
part provides specific information about use of double entry bookkeeping system as well as
preparation of trail balances by the help of balance off rules to finish the ledger. Apart from this,
preparation of final account is also being done by adjusting accruals, depreciation and
prepayments (Edwards, 2013). Understanding of several final accounts that are prepared by
through using different types of organisation is done accordingly.
TASK 1
P1: Double entry bookkeeping system of debits and credits
In every business organisation, it is vital for them to make use of various accounting deal
that are done during the period of time. Double entry system of accounting means that all
business transaction used to get involve into two accounts. Like for example, in case company
borrows certain amount of money from their bank, the company’s overall cash account would
have enhanced and its liability of loans must be payable by the parties. In case of double entry
system which is equal value of funds that always transferred from one statements to another.
Accountants can use debit and credit terms in order to determine, whether the money is being
transferred from the account books (Weil, Schipper and Francis, 2013). This has been stated in
various ways that have multiple effectives of the statements, the total value entered on left side
of an account must be equal to the total amount mentioned at the right side of column. It is
complete system of book-keeping that is having two aspects for each transaction. In order to
make analysis of various financial statements those are prepared by the company accountant
need to first record journal entry of the transactions and then after go on to make trail balance.
Journal entries: It refers to be the logging system of accountancy that which helps to
record each and every transaction those are associated with cash or credit. The financial manager
need to consider various transactions and every data must be related to debit and credit amount.
The total of debit and credit must be equal at both the side. All those accounting transactions that
are recorded into the journal are sorted before posted into the ledger books as per their nature and
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types. There are various types of account that are needed to be prepared such as cash account,
account receivables and stock turnover statements (Beatty and Liao, 2014).
Preparation of such kind of account and entries is being collectively associated with book
keeping. Recording of transaction is utmost important for the company as they are responsible
for generating more reliable and accurate outcomes to the company which will be taken into
account for attaining their aims and objectives in effective manner. These types of books must be
recorded in every financial transaction on continuous basis in order to avoid any mistakes. The
primary motive of recording of accounting transaction is to serve internal and external
organisation so that fair picture of business can be attaining in near future time.
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General Ledger accounts
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P2: Preparation of trail balance
Trail balance is one of the primary statement that is being prepared by taking vital
information from various journal and ledger books. It consists of major two sides, namely credit
and debits. All the sum recorded into this record must be same at either side. Every assets and
expenses must be recorded on debits and credit side of tail balance. It is primary job of
accountant in every organisation to prepare this statements on continuous basis so that further
statements can be made in correct manner (Henderson and et. al., 2015). In case any unbalance
found in the trail balance would results in different types of errors and omissions that would
results in bad impacts on growth and financial stability of the company.
Particulars Debit Credit
Cash account 11070
Bank account 60675
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Capital account 65000
Purchases account 18000
Trade payable account 14000
Trade receivable account 12000
Sales account 26000
Equipment account 3000
Prepaid Insurance account 75
Prepaid Rent account 150
Stationary account 30
Total 105000 105000
TASK 2
P3: Formulation of financial statements
All the financial account must consist of two statements such as profit and loss statements
and balance sheets. The primary motive of preparing financial account is to get reliable data
regarding company’s overall performance that are done within an accounting year. Some of the
reliable statements are mentioned underneath:
Income statement: This seems to be refers as the main record that is prepared for the
purpose of analysing overall net profit a company is generating during a financial period. All the
expenses and losses those are recorded on debit while, income and profits are recorded into
credit side.
Balance sheet: It is one of the main statements that is showing highlight of the company
that reflects detail information about assets and liabilities of an organisation.
Profit and loss statement for the year ended 31st December, 2017
Particular Amount
Revenue 125000
less: sales returns 1500
Total Revenue 123500
Less: Cost of goods sold 83500
Discount received 1000
Rent received in advance 4850
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Gross profit 45850
Expenses:
Rent & rates expenditure 1500
Telephone expenses 900
Insurance expenses 7500
Bad debts 1200
Depreciation 5000
Wages and salaries 13200
Provision for bad-debts (934)
Less: Bad debts written off (650) 284
Outstanding expenditure 340
Net profit 15926
Balance sheet as at 31st December, 2017
P4: Preparation of financial statements for sole trader and limited companies
Profit and loss statement for the sole trader EBay
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Balance sheet of sole trader of EBay
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