Accounting Report: Financial Statements, Costing Methods, and Analysis

This accounting report offers a detailed examination of business transactions, including the preparation of financial statements for Jennifer Ltd and See-it-now Ltd, a travel agency. It contrasts financial and management accounting, covering journal entries, ledger accounts, trial balances, income statements, and balance sheets. The report computes product costs and net profits using marginal and absorption costing methods, analyzing their differences. Furthermore, it explores high-quality financial information principles, emphasizing relevance, reliability, understandability, comparability, consistency, neutrality, and materiality to ensure accurate and reliable financial reporting. The report also discusses the features of high-quality financial information to both the company's management.

ACCOUNTING

Abstract
The report will present a detailed analysis of the business transaction by preparing the
financial statements and will throw a purview regarding the contrast in between the financial and
management accounting. It will also include computation of products cost and net profits by
applying the marginal and absorption costing method.

TABLE OF CONTENTS
Abstract ...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
Section A1........................................................................................................................................1
1. Preparing journal entries for the month of April ....................................................................1
Posting the entries into the ledger accounts ...............................................................................2
2. Trial balance as of 30th April .................................................................................................6
4. Framing income statement and balance sheet for the April month ........................................6
Section A2........................................................................................................................................7
Discussing difference between MA and FA ..............................................................................7
Explaining features of the high quality Financial information to both the company's
management................................................................................................................................9
Stating one statement that describes the final reports...............................................................11
SECTION B...................................................................................................................................11
Total Cost per unit under traditional costing system................................................................11
Under or Over absorption for Product B and Product C...........................................................12
Profits under Marginal and Absorption costing........................................................................12
Difference between absorption and marginal costing ..............................................................15
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Accounting refers to the practice of entering or recording the financial transactions that
are pertaining to the business. It is the process that involves interpreting, assessing and reporting
the business transactions to the oversight agencies, tax collection enterprises and the regulators.
The present report focuses on Jennifer Ltd and See-it-now Ltd, operates its business as a travel
agency and started its business from the month of April. Furthermore, the report throw a deeper
insights towards framing final reports through analysing the business transactions. Moreover, it
also includes high quality financial principles that the firm needs to follow for making reliable
reporting.
Section A1
1. Preparing journal entries for the month of April
Journal entries
Date Particulars Debit Credit
1st April Cash a/c Dr. 20000
Computer Equipment
a/c Dr. 40000
To capital a/c 60000
Depreciation A/c Dr. 600
To computer
Equipment 600
2nd April Rent expense A/c Dr. 1700
To cash A/c 1700
3rd April Office supplies A/c Dr. 1100
To cash A/c 1100
Office supplies
expense A/c Dr 400
To Office supplies 400
10th April Prepaid insurance 3600
To cash 3600
Insurance A/c Dr. 200
1

To prepaid Insurance 200
24th April Cash a/c Dr. 7900
Accrued commission
A/c Dr. 1650
To commission
received 9550
28th April
Salaries expense A/c
Dr. 2120
To cash A/c 1800
To outstanding salary 320
29th April Repair expense 250
To cash 250
30th April
Telephone bill expense
A/c Dr. 650
To cash 650
30th April Drawing A/c Dr. 1500
To cash A/c 1500
81670 81670
Posting the entries into the ledger accounts
Ledger
Accounts
Dr. Cash a/c Cr.
Date Particulars Amount Date Particulars Amount
1st April To capital 20000 2nd April
By rent
expense 1700
24th April
To commission
received 7900 3rd April
By office
supplies 1100
10th April
By prepaid
insurance 3600
28th April By salaries 1800
2

29th April
By repair
expense 250
30th April
By telephone
bill expense 650
30th April By Drawings 1500
30th April By balance c/d 17300
27900 27900
Dr.
Computer
equipment
A/c Cr.
Date Particulars Amount Date Particulars Amount
1st April To capital 40000 30th April
By
depreciation 600
30th April By balance c/d 39400
40000 40000
Dr. Capital A/c Cr.
Date Particulars Amount Date Particulars Amount
30th April To balance c/d 60000 1st April By cash A/c 20000
By computer
equipment 40000
60000 60000
Dr.
Depreciation
A/c Cr.
Date Particulars Amount Date Particulars Amount
30th April To computer 600 30th April By balance c/d 600
3

Equipment
600 600
Dr.
Rent expense
A/c Cr.
Date Particulars Amount Date Particulars Amount
2nd April To cash 1700 30th April By balance c/d 1700
1700 1700
Dr.
Office
supplies A/c Cr.
Date Particulars Amount Date Particulars Amount
3rd April To cash 1100
By office
supplies
expense 400
30th April By balance c/d 700
1100 1100
Dr.
Office
supplies
expense A/c Cr.
Date Particulars Amount Date Particulars Amount
To Office
supplies 400 30th April By balance c/d 400
400 400
Dr.
Prepaid
Insurance A/c Cr.
4

Date Particulars Amount Date Particulars Amount
10th April To cash 3600 By insurance 200
30th April By balance c/d 3400
3600 3600
Dr. Insurance A/c Cr.
Date Particulars Amount Date Particulars Amount
To prepaid
Insurance 200 30th April By balance c/d 200
200 200
Dr.
Accrued
Commission
A/c Cr.
Date Particulars Amount Date Particulars Amount
24th April
To commission
received 1650 30th April By balance c/d 1650
1650 1650
Dr.
Commission
received A/c Cr.
Date Particulars Amount Date Particulars Amount
30th April To balance c/d 9550 24th April By cash 7900
By accrued
commission 1650
9550 9550
5

Dr.
Salaries
Expense A/c Cr.
Date Particulars Amount Date Particulars Amount
28th April To cash 1800 30th April By balance c/d 2120
To outstanding
salary 320
2120 2120
Dr.
Outstanding
salary A/c Cr.
Date Particulars Amount Date Particulars Amount
30th April To balance c/d 320
By salaries
expense 320
320 320
Dr.
Repair
expense A/c Cr.
Date Particulars Amount Date Particulars Amount
29th April To cash 250 30th April By balance c/d 250
250 250
Dr.
Telephone bill
expense A/c Cr.
Date Particulars Amount Date Particulars Amount
30th April To cash 650 30th April By balance c/d 650
650 650
6

Dr. Drawings A/c Cr.
Date Particulars Amount Date Particulars Amount
30th April To cash 1500 30th April By balance c/d 1500
1500 1500
2. Trial balance as of 30th April
Trial balance
Particulars Debit Credit
Cash 17300
Capital 60000
Computer equipment 39400
Depreciation 600
Rent 1700
Office supplies 700
Office supplies expense 400
Prepaid insurance 3400
Insurance 200
Accrued commission 1650
Commission received 9550
Salaries expense 2120
Outstanding salary 320
Repair expense 250
Telephone bill 650
Drawings 1500
Total 69870 69870
4. Framing income statement and balance sheet for the April month
Income statement
Particulars Amount Total
7

Other income :
Commission received 9550
Expenses :
Depreciation 600
Rent 1700
Office supplies expense 400
Insurance 200
Salaries expense 2120
Repair expense 250
Telephone bill 650 5920
Net profit 3630
Balance sheet
Particulars Amount Total
Equities and liabilities :
Capital 60000
add: profits 3630
Less : Drawings 1500 62130
Current liabilities:
Outstanding salary 320 320
Total liabilities 62450
Fixed assets :
Computer equipment 39400 39400
Office supplies 700 700
Total non-current assets 40100
8

Current assets :
Cash 17300
Prepaid insurance 3400
Accrued commission 1650
Total current assets 22350
Total assets 62450
Section A2
Discussing difference between MA and FA
Basis Financial Accounting Management accounting
Meaning FA refers to an accounting
system that emphasizes on
framing of final reports of an
enterprise in order to
communicate the financial
information to the interested
users.
On the other hand it refers to
the branch of accounting that
facilitates reliable and relevant
information to managers for
making plans, strategies and
policies for smooth
functioning of the business
operations.
Reporting Under financial accounting,
reporting is been made for the
public review, all the amounts,
figures and the facts are tended
to be disclosed publicly.
Under MA, reporting is made
for internal purpose. The facts
and the figures are seen as
confidential within the
management teams and the
other individuals in order to
make decisions.
Format In FA, manager needs to
follow the universal reporting
accounting standards that
includes GAAP or IFRS.
In MA there does not exist set
patterns or the format for the
reporting (Difference between
financial and management
9