Financial Accounting: Journal Entries, Ledger, Trial Balance

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HNBS 310 FINANCIAL ACCOUNTING
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Table of Contents
INTRODUCTION........................................................................................................................3
SCENARIO 1.............................................................................................................................. 4
QUESTION 1..........................................................................................................................4
QUESTION 2........................................................................................................................13
SCENARIO 2............................................................................................................................ 15
QUESTION 1........................................................................................................................15
QUESTION 2........................................................................................................................18
CONCLUSION.......................................................................................................................... 21
REFERENCES........................................................................................................................... 22
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INTRODUCTION
Financial accounting emerges to be a specialised branch of accounting that helps in keeping
a track of the financial transactions of the company in accordance to the standardised
guidelines and the recording of the transactions, therefore, takes place (Macve, 2015). This
helps in presenting the financial statements as well for effective planning and decisions. In
order to ensure effective management, control and planning of the limited resources the
bookkeeping is conducted which helps in recording the data effectively and the
interpretation of the reports are carried out.
Similarly, this report aims to record the transactions through double entry bookkeeping and
then preparing the ledger accounts and then extracting the trial balance out of the same. It
will then be followed by preparation of the profit and loss account and the balance sheet
which will help in evaluating the performance of the firm. In the last part of the assignment,
after reviewing the bank statement in order to record the un-recorded transactions the
bank reconciliation statement will be drawn up followed by the explanation of the few
terms. At the last part in order to rectify the errors the journal entries will be passed and a
suspense account will be prepared in order to rectify the difference amount.
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SCENARIO 1
As a Junior Accountant of a small accountancy firm the bookkeeping tasks will be prepared
of a business that starts on 1June 2016 and helps in preparing the primary books, general
ledger, purchase ledger, Sales ledger, and the statement of reconciliation which will be
ended by extracting the trial balance as a result to prepare the statutory accounts.
QUESTION 1
For the first month of trading of the business started on 1 June 2016 the transactions that
occurred in the month will be recorded through passing Journal entries for each of the
transaction that occurred and then it will be followed by preparing the ledger accounts and
then extracting the trial balance (Hoyle et al, 2015).
1. JOURNAL ENTRIES
Journal entries are considered to be the first stage of the accounting cycle which are used in
order to record the business transactions which are recorded as and when the business
events occurs. These are recorded in the general journal in order to depict the changes that
it renders to the accounting equation (Minnis and Sutherland, 2017). The steps followed in
making the journal entries for a business firm includes the three steps as discussed under:
Identification of the transaction
In this first step, the business transactions occurring are to be identified which will then be
recorded in the transaction book (Sangster, 2015).
Analysing the transactions
The second step is to analyse the transactions and their economic impact on the business
and the accounting equation so as to make correct entry under concerned account.
Recording journal transactions
The next step is to record the journal transaction after proper identification and analysis of
the transactions (Sangster, 2015).
Thus the counting cycle is completed and the transactions are effectively recorded.
After the recording of the financial transactions are completed in the business in an
accounting period the ledger and trial balance will be created that will eventually lead to a
creation of the set of full financial statements (Minnis and Sutherland, 2017).
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GENERAL JOURNAL
(In the books of Muhammad)
For the month of June 2016
Date
2016
Account title and explanation L/
F
no.
Debit
Amount
(£)
Credit
Amount
(£)
June 1 Cash
Capital
(To record investment made in business)
65,000
65,000
June 2 Purchase
Muhammad
(To record goods purchase by Muhammad
on credit)
8,000
8,000
June 7 Cash
Sales
(To record a quarter of the inventory sold)
4,000
4,000
June 8 Purchase
Bank
(To record half payment done through a
bank)
8000/2
4,000
4,000
June 14 Insurance Premium
Bank
(To record premium paid through a bank)
75
75
June 15 Stock
Sales
(To record inventory sold)
12,000
12,000
June 16 Purchase
Muhammad
(To record goods purchased on credit)
10,000
10,000
June 18 Computer Equipment
Cash
(To record computer equipment
purchased)
3,000
3,000
June 20 Rent
Bank
(To record rent paid through cheque for
the month of January)
150
150
June 21 Cash
Sales
(To record inventory sold)
10,000
10,000
June 25 Cash
Bank
(To record cash withdrawn which is put
100
100
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into petty cash tin)
June 30 Stationery
Cash
(To record stationery purchased from cash
tin)
30
30
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2. LEDGER ACCOUNTS
Capital A/c
Dr Cr
Date
2016
Particulars J/F
no.
Amoun
t
(£)
Date
2016
Particulars J/F
no.
Amount
(£)
June
30
Balance c/f 65,000 June 1 Cash a/c 65,000
Total 65,000 Total 65,000
July 1 Balance b/d 65,000
Sales A/c
Dr Cr
Date
2016
Particulars J/F
no.
Amount
(£)
Date
2016
Particulars J/F
no.
Amount
(£)
June 30 Balance c/f 26,000 June 7 Cash 4,000
June 15 Stock 12,000
June 21 Cash 10,000
Total 26,000 Total 26,000
01/07/’16 To balance b/d 26,000
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Purchase A/c
Dr Cr
Date
2016
Particulars J/F
no.
Amount
(£)
Date
2016
Particulars J/F
no.
Amount
(£)
June 2 Muhammad 8,000 June 30 Balance c/f 22,000
June 8 Bank 4,000
June 16 Muhammad 10,000
Total 22,000 Total 22,000
July 1 Balance b/d 22,000
Cash A/c
Dr Cr
Date
2016
Particulars J/F
no.
Amount
(£)
Date
2016
Particulars J/F
no.
Amount
(£)
June 1 Capital 65,000 June 18 Computer
Equipment
3,000
June 8 Sales 4,000 June 30 Stationery 30
June 21 Sales 10,000 June 30 Balance c/f 76,070
June 25 Bank 100
Total 79,100 Total 79,100
July 1 Balance b/d 76,070
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Muhammad A/c
Dr Cr
Date
2016
Particulars J/F
no
.
Amount
(£)
Date
2016
Particulars J/F
no.
Amount
(£)
June 30 Balance c/f 18,000 June 2 Purchase 8,000
June 16 Purchase 10,000
Total 18,000 Total 18,000
01/07/’16 Balance b/d 18,000
Computer Equipment A/c
Dr Cr
Date
2016
Particulars J/F
no.
Amount
(£)
Date
2016
Particulars J/F
no.
Amount
(£)
June 18 Cash 3,000 June 30 Balance c/f 3,000
Total 3,000 Total 3,000
Insurance Premium A/c
Dr Cr
Date
2016
Particulars J/F
no.
Amount
(£)
Date
2016
Particulars J/F
no.
Amount
(£)
June 14 To Bank a/c 75 July 30 To balance c/f 75
Total 75 Total 75
July 1 By balance b/d 75
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Stock A/c
Dr Cr
Date
2016
Particulars J/F
no.
Amount
(£)
Date
2016
Particulars J/F
no.
Amount
(£)
June 15 Sales 12,000 June 30 Balance c/f 12,000
Total 12,000 Total 12,000
July 1 By balance b/d 12,000
July 1 Balance b/d 3,000
Bank A/c
Dr Cr
Date
2016
Particulars J/F
no.
Amoun
t
(£)
Date
2016
Particulars J/F
no.
Amount
(£)
June 30 Balance c/f 4,325 June 8 Purchase 4,000
June
14
Insurance
Premium
75
June
20
Rent 150
June
25
Cash 100
Total 4,325 Total 4,325
July 1 Balance b/d 4,325
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Stationery A/c
Dr Cr
Date
2016
Particulars J/F
no.
Amount
(£)
Date Particulars
2016
J/F
no.
Amount
(£)
June 30 To Cash a/c 30 June 30 Balance c/f 30
Total 30 Total 30
July 1 By balance b/d 30
Rent A/c
Dr Cr
Date
2016
Particulars J/F
no.
Amount
(£)
Date
2016
Particulars J/F
no.
Amount
(£)
June 20 To Bank 150 June 30 Balance c/f 150
Total 150 Total 150
July 1 By balance b/d 150
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