Financial Accounting Project: Journal, Ledger, and Final Accounts

This financial accounting project report provides a comprehensive overview of the financial accounting process. It begins with the preparation of journal entries and ledger accounts, followed by the creation of a trial balance. The project then moves on to the preparation of final accounts, including the income statement and balance sheet. Furthermore, the report differentiates between the financial accounts of a sole trader and a limited company, providing detailed examples and comparisons. The project encompasses the core elements of financial accounting, offering a practical application of accounting principles and techniques, and is valuable for students studying finance and accounting.

FINANCIAL
ACCOUNTING
Project 1

Table of Contents
INTRODUCTION...........................................................................................................................1
P1 Preparation of Journal and Ledger accounts.....................................................................1
P2 Preparation of trail balance...............................................................................................4
P3 Preparation of final accounts.............................................................................................5
P4 Preparation of financial accounts for sole trader and limited company............................6
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Financial accounting is the process of preparation of financial accounts including all
records and books of accounts such as Journal entries, ledger accounts, trial balance, income
statement and balance sheet. These accounts are prepared annually for reflecting the true and fair
image of the organization. In this project report financial accounts of a small accountancy firm
are prepared in first of this particular report.
P1 Preparation of Journal and Ledger accounts
1

General Ledger accounts
Cash account
Particulars Debit amount Particulars Credit amount
Sales account 4000 Equipment account 3000
Sales account 10000 Stationary account 30
Bank account 100 Balance c/d 11070
Total 14100 Total 14100
Bank account
Particulars Debit amount Particulars Credit amount
Capital account 65000 Account payable account 4000
Prepaid insurance account 75
Prepaid rent account 150
Cash in hand account 100
Balance c/d 60675
Total 65000 Total 65000
Capital account
Particulars Debit amount Particulars Credit amount
Balance c/d 65000 Bank account 65000
2

Total 65000 Total 65000
Purchases account
Particulars Debit amount Particulars Credit amount
Trade payable account 8000 Balance c/d 18000
Trade payable account 10000
Total 18000 Total 18000
Trade payable account
Particulars Debit amount Particulars Credit amount
Bank account 4000 Purchase account 8000
Balance c/d 14000 Purchase account 10000
Total 18000 Total 18000
Trade receivable account
Particulars Debit amount Particulars Credit amount
Sales account 12000 Balance c/d 12000
Total 12000 Total 12000
Sales account
Particulars Debit amount Particulars Credit amount
Balance c/d 26000 Cash account 4000
Trade receivables account 12000
Cash account 10000
Total 26000 Total 26000
3

Prepaid Insurance
account
Particulars Debit amount Particulars Credit amount
Bank account 75 Balance c/d 75
Total 75 Total 75
Equipment account
Particulars Debit amount Particulars Credit amount
Cash account 3000 Balance c/d 3000
Total 3000 Total 3000
Prepaid Rent account
Particulars Debit amount Particulars Credit amount
Bank account 150 Balance c/d 150
Total 150 Total 150
Stationary account
Particulars Debit amount Particulars Credit amount
Cash account 30 Balance c/d 30
Total 30 Total 30
P2 Preparation of trail balance
Trail Balance
Particulars Debit Credit
Cash account 11070
4

Bank account 60675
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
P3 Preparation of final accounts
5

Balance Sheet as at 31st December 2017:
P4 Preparation of financial accounts for sole trader and limited company
Income statement of sole trader
Particulars Amount
Sales Revenue 20000
Cost of goods sold 3250
Gross Profit 16750
Expenses:
6

Research and Development activities 1224
Selling and Administrative expenses 380
Others operating expenses 290
Incomes:
Rent received 5630
Income Before Tax 1250
Income Tax Expense 8880
Discontinued Operations 450
Other operating incomes 650
Net Income 31716
Preferred Stock And Other Adjustments 2314
Net Income Applicable To Common Shares 29402
Balance sheet of the sole trader
Particulars Amount
Current Assets:
Cash 2200
Short Term Investments 3730
Account Receivables 250
Inventory 1150
Other Current Assets 6840
Total Current Assets 14170
Long Term Investments 780
Plant and Machinery 22000
Goodwill 45000
7

Intangible Assets 6200
Accumulated Amortization 650
Other Assets 3200
Deferred Long Term Asset Charges 4520
Total Assets 82350
Current Liabilities:
Accounts Payable 5200
Current debts 1500
Other Current Liabilities 3500
Total Current Liabilities 10200
Long Term Debt 9000
Other Liabilities 2350
Deferred Long Term Liability Charges 4890
Total Liabilities 16240
Net Tangible Assets 66110
Income statement of company
Particulars Amount
Sales Revenue 54000
Cost of goods sold 3600
Gross Profit 57600
Expenses:
Research and Development activities 6500
Selling and Administrative expenses 1800
Non Recurring expenses 562
8

Other operating expenses 3600
Total Operating Expenses 12462
Incomes:
Income from recurring Operations 5400
Other Items 2600
Earnings Before Interest and Taxes 6500
Interest Expense 580
Income Tax Expense 450
Minority Interest 6540
Income From Continuing Ops 980
Non-recurring Events 5800
Discontinued Operations 650
Extraordinary Items 840
Effect Of Accounting Changes 690
Other Items 540
Net Income 64246
Balance sheet of company
Particulars Amount
Current Assets:
Cash 3600
Short Term Investments 2800
Net Receivables 9100
Inventory 3980
9

Other Current Assets 5000
Total Current Assets 24480
Long Term Investments 6500
Property Plant and Equipment 5800
Goodwill 9600
Intangible Assets 48000
Accumulated Amortization 6500
Other Assets 6500
Deferred Long Term Asset Charges 450
Total Assets 83350
Current Liabilities
Accounts Payable 13000
Short/Current Long Term Debt 9500
Other Current Liabilities 9800
Total Current Liabilities 2100
Long Term Debt 68000
Other Liabilities 250
Deferred Long Term Liability Charges 650
Minority Interest 5540
Negative Goodwill 6980
Total Liabilities 115820
Stockholders' Equity:
Misc. Stocks Options Warrants 90000
Redeemable Preferred Stock 500
10