Introduction to Financial Accounting: March 2021 Transactions Analysis

This financial accounting assignment analyzes various transactions that occurred in March 2021. It begins with an introduction to financial accounting, focusing on the summarization, evaluation, and reporting of a company's financial activities, including the use of Generally Accepted Accounting Principles (GAAP) and the importance of the prudence concept. The main body details various transactions such as credit and cash sales, credit purchases, purchase returns, cash receipts and payments, and equipment purchases. The assignment includes journal entries for all transactions, along with sales, purchases, and cash books. It presents trial balances, an income statement, and a statement of changes in financial position. The document also explains the prudence principle and its application in business. The analysis covers a comprehensive range of accounting activities, providing a detailed overview of financial statement preparation and analysis.

Introduction to Financial
Accounting
1

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1...................................................................................................................................................3
2...................................................................................................................................................4
3.................................................................................................................................................21
CONCLUSION..............................................................................................................................22
REFERENCES..............................................................................................................................23
2

INTRODUCTION
Financial accounting is area of the accounting that deals with the summarization,
evaluation, including reporting of company's financial activities. This entails the preparing of
financial accounts for public usage. Fundamental form of financial accounting standards
employed in any particular jurisdiction is known as Commonly Agreed Accounting Principles. It
contains the rules, regulations, and conventions that govern the business sector (Connolly and
Bank, 2018). The study covers practical task of recording and adjusting certain financial
transaction in financial statement. Further, this covers importance of prudence concept along
with examples to use the concept in business.
MAIN BODY
1.
Events occurred during month of March 2021: Following are different types of functions and
transactions were carried out in March 2021, as outlined below:
Credit Sales: Customers purchase for which payments are deferred are referred to credit sales.
Late payments enable companies to create cash from the goods they have bought, and then
would use to repay the vendor. As a result, allowing buyers to create additional purchases is
possible with a reasonable delayed payment (Bendell and Doyle, 2017). In some businesses,
where lengthier payment conditions could be used to entice customer base, credit sales are key
competitive method. As in given case credit sales of 4500 has been made to Cold. This
transaction affected sales and trade receivables account simultaneously.
Cash Sales- Cash sales in business are those that are made with cash. This is the situation in
which the vendor gets the cash payment at time of delivering. Cash sales, apart from credit sales,
don't really contribute in accounts receivables. To meet the criteria sale as cash sale, seller does
not have to receive currency notes. Cash transactions are those that include a direct deposit
into seller's bank account including credits card payments. In given case, cash sales amounting
600 has been made. This affected cash and sales account simultaneously (AN and AK, 2020).
Credit Purchase: When a company buys products or services on credits or on account with the
intention of reselling them later, this is referred to as Credit Purchases in reporting. Credit
transactions, like purchases, may be employed to buy products and services whether on credits or
on account. Account receivables and account payable are generated as a result of credit purchase.
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The purchaser's account payables are their present obligation, and they would pay supplier
at later agreed-upon date. It should be registered as Credit Transaction by the buyer. As here,
credit purchase of 1800 has been made from Morn which has affected purchases as well as trade
payable.
Purchase return- This is regarded as return of goods purchased from suppliers on credit. This
transaction affects purchase and trade payable. In given case, goods have been returned which
are bought from Night of 1400. This has impacted purchase as well as purchase return account,
and also trade payable balance will be reduced (Mian and Sufi, 2018).
Cash receipts from customers: Cash receipts in business are receipt of cash, usually
from customer, that increases (debit side) a corporation's cash balances on balance sheet. Here
cash received from customer Warn amounting 3100 which affected cash and trade receivable
account.
Cash payment to suppliers- The cash charged to vendors for stock purchases is measured by
adjusting costs of goods sold from income statement and accounts payables from balance sheet
for stock movements. Here payment of 870 to supplier reduced cash and trade payable balance.
Purchase of equipment: The most liquid resource of a business is cash fund. A corporation 's
assets would be reduced if it buys equipment for money (i.e. decrease in cash balance in hand).
Because owner 's capital equals assets less liabilities purchasing equipment with cash would
decrease owner 's capital. Here purchase of equipment increased equipment value and decreased
cash balance.
2.
Date Particular Lr No. Dr. Cr.
31/03/21 Cold A/C 4500
To Sales A/C 4500
(Credit Sale To Cold)
31/03/21 Cash A/C 600
To Sales A/C 600
(Sale For Cash)
31/03/21 Purchase A/C 1800
To Morn A/C 1800
(Credit Purchase From Morn)
31/03/21 Night A/C 1400
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To Purchase Return A/C 1400
(Return Good To Night)
31/03/21 Cash A/C 3100
To Warn A/C 3100
(Received Cash From Warn)
31/03/21 Night A/C 870
To Cash A/C 870
(Made Payment To Night)
31/03/21 Equipment A/C 11000
To Cash A/C 11000
(Purchased Equipment )
31/03/21 Electricity A/C 1000
Drawings A/C 1000
(Being correction entry has been made to record electricity
expense)
31/03/21 Wages Expenses Account 500
Accruals Account 500
(Being wages accrued)
31/03/21 Prepayment Account 1250
Rent Expenses account 1250
(Being prepaid rent recorded)
31/03/21 Depreciation Account 18000
Provision for depreciation
account
18000
(Being depreciation recorded)
31/03/21 Allowance Expenses 770
Allowance for doubtful debts accounts 770
(Being allowance for doubtful debt has been made)
Sales Account
Date Description Dr Date Description Cr
31/03/21 Sales Returns Day
Book
2700 1/3/2021 Balance b/d 30000
0
31/03/21 Sales Day Book 12660
31/03/21 Balance c/d 321880 31/03/21 Cash Sales (CB) 6820
Cold 4500
Cash Sales (CB) 600
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324580 32458
0
31/03/21 Balance b/d 32188
0
Purchases Account
Date Description Dr Date Description Cr
1/3/2021 Balance b/d 153840 Purchase Return 1400
31/03/21 Purchases Day Book 10020
31/03/21 Cash Purchases (CB) 2100
Morn 1800
31/03/21 Balance c/d 16636
0
167760 16776
0
31/03/21 Balance b/d 167760
Carriage inwards Account
Date Description Dr Date Description Cr
01/03/21 Balance b/d 1300
31/03/21 Balance c/d 1300
1300 1300
31/03/21 Balance b/d 1300
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Returns Outwards Account
Date Description Dr Date Description Cr
01/03/21 Balance b/d 5450
31/03/21 Balance c/d 11700 31/03/21 Purchase returns book 4850
31/03/21 NIGHT A/C 1400
11700
1170
0
31/03/21 Balance b/d
1170
0
Inventory Account
Date Description Dr Date Description Cr
01/04/20 Balance b/d 51600 31/03/21 Balance c/d
5160
0
51600
5160
0
31/03/21 Balance b/d 51600
Loan Liability Account
Date Description Dr Date Description Cr
01/03/21 Balance b/d
3000
0
31/03/21 Balance c/d 50000 31/03/21 New Loan (CB) 2000
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0
50000
5000
0
31/03/21 Balance b/d
5000
0
Trade Receivables Account
Date Description Dr Date Description Cr
01/03/21 Balance b/d 45860 31/03/21
Sales Returns Day
Book 2700
31/03/21 Sales Day Book 12660 31/03/21 Discount allowed (CB) 500
31/03/21 Receipts (CB) 5900
31/03/21 Balance c/d
4942
0
58520
5852
0
31/03/21 Balance b/d 49420
Discount Allowed Expense
Account
Date Description Dr Date Description Cr
31/03/21 Cash Book 500 31/03/21 Balance c/d 500
500 500
31/03/21 Balance b/d 500
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Allowance for Receivables
Account
Date Description Dr Date Description Cr
01/04/20 Balance b/d 3000
31/03/21 Balance c/d 3770 31/03/21 Increase Journal 5 770
3770 3770
31/03/21 Balance b/d 3770
Allowance Expense Account
Date Description Dr Date Description Cr
31/03/21 Increase Journal 5 770 31/03/21 Balance c/d 770
770 770
31/03/21 Balance b/d 770
Trade Payables Account
Date Description Dr Date Description Cr
31/03/21 Purchase Returns Book 4850 01/03/21 Balance b/d
2590
0
31/03/21 Discounts received (CB) 210 31/03/21 Purchases day Book
1002
0
31/03/21 Paid (CB) 3320
31/03/21 Balance c/d 27540
35920 3592
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0
31/03/21 Balance b/d
2754
0
Discount Received Income
Account
Date Description Dr Date Description Cr
31/03/21 Balance c/d 210 31/03/21
Discounts received
(CB) 210
210 210
31/03/21 Balance b/d 210
Equipment Account
Date Description Dr Date Description Cr
01/03/21 Balance b/d
17000
0
31/03/21 New Equipment (CB) 20000 31/03/21 Balance c/d
1900
00
19000
0
1900
00
31/03/21 Balance b/d
19000
0
Provision for Depreciation
Account
Date Description Dr Date Description Cr
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01/04/20 Balance b/d
3400
0
31/03/21
Annual depreciation
journal
1800
0
31/03/21 Balance c/d 52000
52000
5200
0
31/03/21 Balance b/d
5200
0
Depreciation Expense
Account
Date Description Dr Date Description Cr
31/03/21 Annual Dep’n Journal 4 18000 31/03/21 Balance c/d
1800
0
18000
1800
0
31/03/21 Balance b/d 18000
Bank Account
Date Description Dr Date Description Cr
01/03/21 Balance b/d 32880 31/03/21 Payments (CB)
3842
0
31/03/21 Receipts (CB) 32720
31/03/21 Balance c/d 2718
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0
65600
6560
0
31/03/21 Balance b/d 27180
Drawings Account
Date Description Dr Date Description Cr
01/03/21 Balance b/d 5000 31/03/21 Journal 1 1000
31/03/21 Drawings (CB) 3000
31/03/21 Balance c/d 7000
8000 8000
31/03/21 Balance b/d 7000
Capital Account
Date Description Dr Date Description Cr
31/03/21 Balance c/d
16500
0 01/04/20 Balance b/d
1650
00
16500
0
1650
00
31/03/21 Balance b/d
1650
00
Accruals Account
Date Description Dr Date Description Cr
31/03/21 Balance c/d 500 31/03/21 Wages Journal 2 500
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