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Financial Accounting And Its Purpose

Introduction

Financial accounting is an organised course of action including activities such as recording of accounting transaction, classification, verification, interpreting, summarizing and communicating or reporting of financial information. Financial accounting provides details and information regarding availability of existing or potential resources, way of financing and output through their utilisation. Financial accounting also provides groundwork for Internal and external stakeholders in order to take significant decisions (Agasisti and Catalano, 2013). All activities and functions of financial accounting are governed or administrated by some rules and guidelines called as financial accounting principles such as UK GAAP (Generally Accepted Accounting Principles). This report provides an explanation about definition of financial accounting, purpose of financial accounting, internal and external stakeholders and brief knowledge about accounting concepts, purpose of providing depreciation and major methods of depreciation, control accounts and purpose of bank reconciliation statements.

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Business Report

1. Financial Accounting and its purpose:

Financial accounting refers to a systematic process classification of financial and non financial transactions, recording of transaction, summarizing them for a better interpretation and reporting under a formal format to internal and external stakeholders. Financial accounting processes are structured in a systematic way and ensures compliances of various accounting principles, policies, rules and regulations (Alver, Alver and Talpas, 2013). Financial accounting gives a structure for quick assessment of any problems and for taking vital decisions. Following are the most considerable purpose of financial accounting, as follows:                                                                       

  • Financial reporting helps to record all financial transactions as per double entry system in an organised manner.
  • It helps to asses the actual position and performance of business organisation.
  • It assists in projecting anticipated earnings and performance of business organisation.
  • Financial reporting provide a basis for better decision making to investors and other stakeholders actual profitability and liquidity situation of business organisation as on a particular date.
  • It ensures compliance of statuary requirements, policies, framework, rules and regulations.
  • It provides a comparative data and records along with previous years data and competitor’s data and record to evaluate the performance effectively.
  • It serve as a formal report of financial health of business organisation to top management and external users of financial information (Barth, 2015).
  • It helps to classify organisation's various assets and liabilities in order to manage them efficiently.

2. Internal and external stakeholder:

Stakeholders are person, individual, group, body of individuals or  organisation having direct or indirect interest in organisation's position, performance, objectives or goals and results. Stakeholder are classified as internal stakeholders and external stakeholders. Internal stakeholders are person, group or individuals within the business organisation having substantial interest. Whereas external stakeholders are individuals, persons, group or organisation outside the business organisation associated with organisation and having direct or indirect interest (Edwards, 2013).

Internal Stakeholder: In a large business organisation internal stakeholders are shareholders, owners, management and employees (Stice and Stice, 2013). Following is a brief discussion about major internal stakeholders and, possible way through which they are interested in financial information of organisation, as follows:

  • Owners and shareholders: They are real stakeholders of entity. Owner and shareholders are holding major shares of a large business organisation and gain profits in case of increase in share price. They are having substantiate stake in organisation in form of profits and dividends. They are highly affected by the performance and financial position of company.  
  • Employees: Employees are most considerable resources of a business organisation and always wants to achieve growth within the organisation. Employees are having sustainable stake in business organisation because their salary and career are dependent on performance and growth of organisation.

External Stakeholder: External stakeholders in case of a large business organisation are its customers. Suppliers, government, creditors etc. Following is a short explanation about key external stakeholders and, manner through which they are interested in financial information of organisation, as follows:

Government: Government collect various taxes on income of business organisation so government hold stake in profits of entities in form of taxes. Government along with collection of taxes insures proper compliance of rules and regulation in business organisation.

Suppliers: Suppliers of goods and raw material receives payments from business organisation and full-fills the demands. They always tries to receive payment in scheduled times and provides credit based on liquidity position of company so suppliers having stake in business organisation in form of their payments and sales (DRURY, 2013).

Customers: Customers decides an organisation's growth and revenue. They contribute in business by purchasing and by recommending product of company to others. Customers buy product or services of organisation by analysing their popularity, quality, performance, growth and beliefs therefore they are holding stake in form of performance and sustainability of business organisation.

Investors: Investors are most significant for business organisation because they contribute in expansion and growth of company by investing their money or other financial assets in company. They are highly affected by performance and growth of business organisation. Investors are actual stakeholder of company because they always tries to get maximum return from investment made by in business organisation.

CLIENT 1

1. Journal Entries and Ledgers in the book of Alexandra Study:

Date

Particulars.....

Debit

Credit

01/01/19

Premises A/c....................................................................Dr.                          

240000

 

 

Motor Van A/c.................................................................Dr.

51250

 

 

fixtures A/c................................................................      Dr.

8100

 

 

Inventory A/c................................................................   Dr.

23900

 

 

P Mole A/c................................................................       Dr.

4400

 

 

F Lane A/c................................................................       Dr.

6100

 

 

Bank A/c................................................................          Dr.

68400

 

 

Cash A/c................................................................          Dr.

15600

 

 

           To S Hood A/c

 

12150

 

           To J. Brown A/c

 

16600

 

           To Capital A/c (Balancing Figure)

 

389000

 

(Being Owner's Capital is calculated )

 

 

 

 

 

 

 

Therefore, Alexandra Study's Capital at 1st  January  = £ 389000

 

 

 

 

 

 

 

 

 

 

Date

Particulars

Debit

Credit

01/01/19

Storage cost A/c...............................................................Dr.

450

 

 

           To bank A/c

 

450

 

(Being storage cost is paid)

 

 

 

 

 

 

02/01/19

Purchases A/c ................................................................Dr.

7680

 

 

           To S Hood A/c

 

1450

 

           To D Main A/c

 

2060

 

           To W Tone A/c

 

960

 

           To R Foot A/c

 

1610

 

(Being goods purchases on credit from various parties)

 

 

 

 

 

 

03/01/19

J Wilson A/c ................................................................ Dr.

1200

 

 

T. Cole A/c ................................................................  Dr.  

1650

 

 

F. Syme A/c ................................................................Dr.

2100

 

 

J. Allen A/c ................................................................  Dr.

1020

 

 

P. White A/c ................................................................Dr.

2520

 

 

F Lane A/c ................................................................   Dr.

980

 

 

            To Sales A/c

 

9470

 

(Being goods sold on credit to various parties)

 

 

 

 

 

 

04/01/19

Motor Expenses A/c …..................................................Dr.

470

 

 

            To Cash A/c

 

470

 

(Being motor expense is paid)

 

 

 

 

 

 

07/01/19

Capital A/c ................................................................Dr.

1500

 

 

            To Cash A/c

 

1500

 

(Being cash withdrawal by owner himself)

 

 

 

 

 

 

09/01/19

T. Cole A/c................................................................ Dr.  

680

 

 

J. fox A/c  ................................................................ Dr.

1310

 

 

           To Sales A/c

 

1990

 

(Being goods purchase on credit with various parties)

 

 

 

 

 

 

11/01/19

Sale Return A/c ............................................................. Dr.

680

 

 

           To J. Wilson A/c

 

270

 

           To F. Syme A/c

 

410

 

(Being goods is returned back by the parties

 

 

 

 

 

 

16/01/19

Bank A/c   ................................................................ Dr.

7020

 

 

 

 

 

 

           To P. Mullen A/c

 

1400

 

           To F. Lane A/c

 

3100

 

           To J. Wilson A/c

 

850

 

           To F. Syme A/c

 

1670

 

(Being Payment received from various parties)

 

 

 

 

 

 

19/01/19

R Foot A/c  ................................................................ Dr.

50

 

 

           To Purchases Return A/c

 

50

 

(Being Goods is returned to creditor)

 

 

 

 

 

 

22/01/19

Purchases A/c................................................................ Dr.

3740

 

 

            To L Mole A/c

 

1830

 

            To W Wright A/c

 

1910

 

(Being goods purchased on credit)

 

 

 

 

 

 

24/01/19

S Hood A/c  ................................................................ Dr.

3600

 

 

J Brown A/c ................................................................ Dr.

4600

 

 

R Foot A/c  ................................................................ Dr.

1400

 

 

            To Bank A/c

 

6000

 

 

 

 

 

(Being payment is made to creditors)

 

 

 

 

 

 

27/01/19

Salaries A/c  ................................................................ Dr.

4800

 

 

            To Bank A/c

 

4800

 

(Being salaries are paid through cheque)

 

 

 

 

 

 

30/01/19

Business Rates A/c.........................................................Dr.

1320

 

 

            To Bank A/c

 

1320

 

(Being business rates are paid through cheque)

 

 

Purchases A/c

Date

Particulars

Amount

Date

Particulars

Amount

02/01/19

To S Hood A/c

1450

31/01/19

By Trading and P&L A/c

9820

 

To D Main A/c

2060

 

 

 

 

To W Tone A/c

960

 

 

 

 

To R Foot A/c

1610

 

 

 

22/01/19

To L Mole A/c

1830

 

 

 

 

To W Wright A/c

1910

 

 

 

Total

9820

Total

9820

 

 

 

 

 

 

Bank A/c

Date

Particulars

Amount

Date

Particulars

Amount

01/01/19

To Opening Balance (B/f)

68400

01/01/19

By Storage cost A/c           

450

16/01/19

To P Mullen A/c

1400

24/01/19

By S Hood A/c                 

3600

 

To F Lane A/c

3100

 

By J Brown A/c             

4600

 

To J Wilson A/c

850

 

By R Foot A/c                 

1400

 

To F Syme A/c

1670

27/01/19

By Salaries A/c

4800

 

 

 

30/01/19

By Business Rates A/c

1320

 

 

 

31/01/19

By Closing Balance C/d

59250

Total

75420

Total

75420

 

 

 

 

 

 

           D Main A/c

Date

Particulars

Amount

Date

Particulars

Amount

31/01/19

To Closing Balance A/c

2060

02/01/19

By purchases A/c

2060

Total

2060

Total

2060

 

 

 

 

 

 

By Purchases Return A/c 

Date

Particulars

Amount

Date

Particulars

Amount

31/01/18

To Trading and P&L A/c

50

19/01/18

By R foot A/c

50

 

 

50

 

 

50

 R Foot A/c

Date

Particulars

Amount

Date

Particulars

Amount

19/01/18

To  Purchase Return A/c

50

02/01/19

By purchases A/c

1610

24/01/19

To Bank A/c                 

1400

 

 

 

31/01/19

By Closing Balance C/d

160

 

 

 

Total

1450

Total

1610

 

 

 

 

 

 

T Cole A/c

Date

Particulars

Amount

Date

Particulars

Amount

03/01/19

To Sales A/c

1650

31/01/19

By Closing Balance C/d

2330

09/01/19

To Sales A/c

680

 

 

 

Total

2330

Total

2330

 

 

 

 

 

 

J Allen A/c

Date

Particulars

Amount

Date

Particulars

Amount

03/01/19

To Sales A/c

1020

31/01/19

By Closing Balance C/d

1020

Total

1020

Total

1020

 

 

 

 

 

 

F Lane A/c

Date

Particulars

Amount

Date

Particulars

Amount

01/01/18

To Opening Balance (B/f)

6100

16/01/19

By Bank A/c

3100

03/01/18

To Sales A/c

980

31/01/18

To Closing Balance C/d

3980

 

 

 

 

 

 

Total

7080

Total

7080

 

 

 

 

 

 

Cash A/c

Date

Particulars

Amount

Date

Particulars

Amount

01/01/19

To Opening Balance (B/f)

15600

04/01/18

By Motor Expenses A/c

470

 

 

 

07/01/19

By Capital A/c

1500

 

 

 

31/01/19

By Closing Balance C/d

13630

Total

15600

Total

15600

 

 

 

 

 

 

Sales Return A/c

Date

Particulars

Amount

Date

Particulars

Amount

11/01/19

To J Wilson A/c

270

31/01/19

By Trading and P&L A/c

680

 

To F Syme A/c  

410

 

 

 

Total

680

Total

680

 

 

 

 

 

 

L Mole A/c

Date

Particulars

Amount

Date

Particulars

Amount

31/01/19

To Closing Balance C/d

1830

22/01/19

By Purchases A/c                

1830

Total

1830

Total

1830

 

 

 

 

W Wright A/c

Date

Particulars

Amount

Date

Particulars

Amount

31/01/19

To Closing Balance C/d

1910

22/01/19

By Purchases A/c                

1910

Total

1910

Total

1910

 

 

 

 

 

 

J Brown A/c

Date

Particulars

Amount

Date

Particulars

Amount

 

 

 

01/01/19

By Opening Balance b/f

16600

24/01/19

To Bank A/c

4600

31/01/19

By Closing Balance C/d

 

31/01/19

To Closing Balance C/d

12000

 

 

 

Total

16600

Total

16600

 

 

 

 

 

 

Business Rates A/c

Date

Particulars

Amount

Date

Particulars

Amount

30/01/19

To Bank A/c

1320

31/01/19

By Trading and P&L A/c

1320

Total

1320

Total

1320

Storage Cost A/c 

Date

Particulars

Amount

Date

Particulars

Amount

01/07/19

To Bank A/c

450

31/07/19

By Profit & Loss A/c

450

Total

450

Total

450

 

 

 

 

 

 

Sales A/c

Date

Particulars

Amount

Date

Particulars

Amount

31/01/19

To Trading and P&L A/c

11460

03/01/19

By  J Wilson A/c               

1200

 

 

 

 

By T. Cole A/c                   

1650

 

 

 

 

By F. Syme A/c                  

2100

 

 

 

 

By J .Allen A/c                   

1020

 

 

 

 

By P .White A/c                  

2520

 

 

 

 

By F .Lane A/c

980

 

 

 

09/01/19

By T .Cole A/c                    

680

 

 

 

 

 By J fox A/c                       

1310

Total

11460

Total

11460

 

 

 

 

 

 

 S Hood  A/c

Date

Particulars

Amount

Date

Particulars

Amount

24/01/19

To Bank A/c

3600

01/01/19

By Opening Balance (B/f)

12150

 

 

 

02/01/19

By purchases A/c

1450

31/01/19

To Closing Balance C/d

10000

 

 

 

Total

13600

Total

13600

 

 

 

 

 

 

W Tone A/c

Date

Particulars

Amount

Date

Particulars

Amount

31/01/19

To Closing Balance C/d

960

02/01/19

By purchases A/c

960

Total

960

Total

960

 

 

 

 

 

 

J Wilson A/c

Date

Particulars

Amount

Date

Particulars

Amount

03/01/19

To Sales A/c

1200

11/01/19

By Sales Return A/c

270

 

 

 

16/01/19

By Bank A/c

850

 

 

 

 

 

 

 

 

 

31/01/19

By Closing Balance c/d

80

Total

1200

Total

1200

 

 

 

 

 

 

F Syme A/c

Date

Particulars

Amount

Date

Particulars

Amount

03/01/18

To Sales A/c

2100

11/01/19

By Sales Return A/c

410

 

 

 

16/01/19

By Bank A/c

1670

 

 

 

 

 

 

 

 

 

31/01/19

By Closing Balance c/d

20

Total

2100

Total

2100

 

 

 

 

 

 

P White A/c

Date

Particulars

Amount

Date

Particulars

Amount

03/01/19

To Sales A/c

2520

31/01/19

By Closing Balance c/d

2520

Total

2520

Total

2520

 

 

 

 

 

 

P Mullen A/c

Date

Particulars

Amount

Date

Particulars

Amount

01/01/19

To Opening Balance (B/f)

4400

16/01/19

By Bank A/c

1600

 

 

 

 

 

 

 

 

 

31/01/19

By Closing Balance c/d

2800

Total

4400

Total

4400

 

 

 

 

 

 

Capital A/c

Date

Particulars

Amount

Date

Particulars

Amount

07/01/18

To Cash A/c

1500

01/01/18

By Opening Balance b/f

389000

31/01/18

To Closing Balance C/d

387500

 

 

 

Total

389000

Total

389000

 

 

 

 

 

 

J Allen A/c

Date

Particulars

Amount

Date

Particulars

Amount

09/01/18

To Sales A/c

1310

31/01/18

By Closing Balance c/d

1310

Total

1310

Total

1310

 

 

 

 

 

 

Motor Van  A/c

Date

Particulars

Amount

Date

Particulars

Amount

01/01/19

To Opening Balance (B/f)

51250

31/01/19

By Closing Balance c/d

51250

Total

51250

Total

51250

 

 

 

 

 

 

Salaries A/c

Date

Particulars

Amount

Date

Particulars

Amount

27/01/19

To Bank A/c

4800

31/01/19

By Trading and P&L A/c

4800

Total

4800

Total

4800

 

 

 

 

 

 

Motor Expenses A/c

Date

Particulars

Amount

Date

Particulars

Amount

04/01/19

To Cash A/c

70

31/01/19

By Trading and P&L A/c

470

Total

470

Total

470

2. Trial Balance as at 31st January 2019 in the books of Alexandra Study:

Trial Balance for the month of July..........

Particulars

Debit

Credit

Storage Cost

450

 

Purchase

9820

 

Sales

 

11460

Motor Expenses

470

 

Receivables:

 

 

P Mullen

3000

 

F Lane

3980

 

J Wilson

80

 

T Cole

2330

 

F Syme

20

 

J Allen

1020

 

P. White

2520

 

J Fox

1310

 

 

 

 

Cash At Bank

52680

 

Cash In Hand

20200

 

 

 

 

Payables:

 

 

S. Hood

 

10000

J. Brown

 

12000

W Tone

 

960

R Foot

 

160

L Mole

 

1830

W. Wright

 

1910

D Main

 

2060

Premises

240000

 

Van

51250

 

Fixtures

8100

 

Inventory

23900

 

 

 

 

Sales Return

680

 

Purchase Return

 

50

Salaries

4800

 

Business Rates

1320

 

Capital

 

387500

Total

427930

427930

CLIENT 2

1. Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018:

Statement of Profit and Loss of Munteanu Ltd. For the year ended 31st December 2018

Particulars

Amount

Particulars

Amount

To opening inventory

 

15000

By Sales

138000

 

To Purchases

61000

 

Less: Return Inward

3000

135000

Less: Return Outward

1500

59500

By Closing Inventory

 

20000

To Gross profit

 

80500

 

 

 

Total

 

155000

Total

 

155000

 

 

 

 

 

 

To Administration Cost

 

32000

By Gross Profit

 

80500

To Distribution Cost

 

32000

 

 

 

To Depreciation

 

8800

 

 

 

To Finance Cost

 

1500

 

 

 

To Tax

 

2000

 

 

 

To Net Profit

 

4200

 

 

 

Total

 

80500

Total

 

80500

2. Statement of financial position of Munteanu Ltd. As at 31st December 2018:

Statement of financial position of Munteanu Ltd. As at 31st December 2018

Assets

 

 

Amount in EUR

Land

 

 

20000

Building

 

40000

 

Less: Accumulated Depreciation

 

10000

 

 

 

30000

 

         Depreciation for the year

 

800

29200

Plant and machinery

 

60000

 

Less: Depreciation

 

20000

 

 

 

40000

 

         Depreciation for the year

 

8000

32000

Total non-current assets

 

 

81200

 

 

 

 

Inventories

 

 

20000

Prepaid Rent

 

 

3000

Accounts receivable

 

 

26000

Total current assets

 

 

49000

 

 

 

 

Total assets

 

 

130200

Equity and liabilities

 

 

 

Share capital

 

 

40000

Share premium

 

 

20000

Retained Earnings including current year profit

 

 

26200

Equity

 

 

86200

Current and other tax liabilities

 

 

2000

Accrued salaries

 

 

2000

Bank Overdraft

 

 

18000

Accounts payable

 

 

22000

Total current liabilities

 

 

44000

Total  equity and liabilities

 

 

130200

3. Accounting Concepts: Consistency and Prudency:

Accounting concepts are basic fundamentals rules that are required to be followed while framing financial statement of a business organisation (Fourie, 2015). Accounting concepts are acts as guideline for finalization of accounts. Following are the major accounting concepts, as follows:

Consistency: This accounting concept emphasises towards maintaining consistency with respect to accounting policies and procedures followed by a business organisation from one period to other. This accounting concept ensures uniformity in accounts of one or more periods.

Prudence: This accounting concepts requires that business organisation should not overestimate its income or revenues, assets, and should not underestimate its expenses, losses and obligation or liabilities.

4. Purpose of depreciation in formulating accounting statement:

Depreciation provided by business organisation on fixed assets exhibits a reduction in value of fixed asset due to physical wear and tear or obsolescences and by any other reason during a particular period. Two significant methods used by entities to provide and calculate depreciation are discussed as below:

  1. Straight Line Method: Under this method of depreciation entity provides depreciation cost evenly throughout the whole useful life or effective life of a tangible fixed asset. This method is used by organisations in case where economic benefits from an fixed asset are expected to be realised equally over its effective life. This method is also appropriate in case of uncertainty regarding economic benefits (Hale and Held, 2012).
  2. Written Down Method: It is method of depreciation under which depreciation in form of a fixed percentage is charged by entity on book value of assets, over its effective useful life. This method is used for those assets whose maintenance expenses increases as their useful life increases like vehicles, heavy machinery.

5. Evaluation of difference between financial statements prepared by the sole trader & the limited companies

Following are the major differences among financial statements prepared by sole traders and limited companies:

Sole trader

Limited companies

The main purpose of preparation of financial statements for sole traders is to assess their  actual profitability condition (Hall, 2012).

Where as in limited companies financial statements are prepared by companies to report their actual performance and position to internal or external stakeholder.

Here less statutory requirements to be followed by sole traders as compared to limited companies.

There are too much compliance of statutory requirement while preparing financial statement of Limited companies.

CLIENT 3

1. Purpose of preparation of Bank-reconciliation Statement

Every business organisation prepares cash book in which cash as well as bank transactions are recorded. Sometimes difference arises in amount in bank column of cash book and balance of bank statement due some common reasons. So in order to reconcile such balance bank-reconciliation statement is prepared by business organisation. Bank-reconciliation statement is prepared by entities on monthly basis, annual basis and quarterly basis. However most of the entities prepare bank reconciliation statements on monthly basis to avoid any complexity at year end (Jönsson, 2013).

2. Reasons for difference between balance of bank column of cash book and bank statements

Most common reasons for difference between balance on the bank statement and the balance on the books are deposits in transit, errors of books, electronic charges charged by bank but not yet recorded in books, outstanding charges, check printing charges, bank service charges, cheque issued but not presented etc.

3. Imprest

Imprest is a system of accounting in which a fixed amount is reserved by organisation for payment of day to day small amount of expenses. Petty cash book is an example of accounting under imprest system (Tschopp and Nastanski, 2014).

4. Bank-reconciliation Statement as at 30 September 2018

Particulars

Amount

- Bank Balance as per pass book

398

Add: Items having effects of higher balance in cash book

 

- Bank charges not recorded in cash book......

36

- Adjustment for direct debit rates..............

105

 

 

Less: Items having effects of lower balance in cash book

 

· Payments to:

 

- C David

122

- S Leeming

116

- C Lyons

87

 

 

 

 

Bank balance as per cash book

214

CLIENT 4

1. Sales Ledger Control Account in the books of January 2018

Sales Ledger Control A/c

Particulars

Amount (£)

Particulars

Amount (£)

Balance b/d.........

12600

Sales Return.............

4320

Credit Sales.............

152350

Bad Debts..................

1600

 

 

Discount Allowed.............

1060

 

 

Bank/ Cash (Receipt from credit customers)..................

120610

 

 

Set-off (Transfer to purchase ledger).............

640

 

 

Balance c/d.................

36720

Total 

164950

Total

164950

Balance b/d

36720

 

 

2. Purchase Ledger Control Account in the books of January 2018

Purchase Ledger Control A/c

Particulars

Amount (£)

Particulars

Amount (£)

Discount Received.......

850

Balance b/d............

11360

Purchase Return..........

3110

Credit Purchase...................

126500

Bank/ Cash (Payment to suppliers)..............

91010

Bank  (Refund from supplier).............

500

Set-off (Transfer from sales ledger)............

640

 

 

Balance c/d..........

42750

 

 

Total

138360

Total

138360

 

 

Balance b/d

42750

3. Control Account

A control account is general ledger account which exhibits total amount of balance of related subsidiary ledgers accounts. Main purpose of control account is to keep all general ledgers free of any complex headings or details and still to provide accurate balance for preparing final accounts (Oulasvirta, 2014).

CLIENT 5

1. Suspense account and its main features

Suspense account is prepared by business organisation to record unclassified transactions.

Suspense account is an general ledger account which temporarily records balances, amounts or entries which are remain unclassified or unidentified at the year end. For example in an organisation supplier invoices amounting $1250 for services. Entity has doubt about name of  department to be charged, such amount can be placed in a suspense account.

Features of suspense account:

  • Suspense account is prepared by business organisation to identify any error or in-appropriate amount in accounts.
  • It provide a framework for quick assessment of any type of error.
  • It assists in finalization of accounts within the scheduled time (Mullinova, 2016.).
  • It defines nature of error and helps to allocate them.    
  • It helps to find out any fraudulent bills, payments. embezzlement or unidentified thefts.

2. Trial Balance using a control account as balancing figure

Particulars

Dr. (in £)

Cr.  (in £)

Purchase Account Account

7000

 

Sales Account Account

 

11000

Rent Paid Account

2500

 

Cash in bank Account

8400

 

Travel expense Account

1600

 

Receivables Account

3200

 

Payables Account

 

3500

Opening Inventory

2200

 

Capital Account

 

7100

Control Account

 

3300

Total

24900

24900

3. Journal Entries for corrections

Particulars

 (in £)

(in £)

Simon A/c …........................................................................... Dr.

       To Smith A/c

(..Being sale was debited to smith instead of Simon..)

2200

                        

2200            

Jones  A/c..................................................................................Dr.

        To Suspense A/c

(..Being sale of £420 not entered in Jones account, now entered...)

4200

 

4200

Suspense A/c.............................................................................Dr.

        To White A/c

(..Being purchase of £750 not entered in White account, now entered..)

7500

 

7500

           

Suspense A/c

Particulars

Amount

Particulars

Amount

To White...A/c

7500

By Balance...b/d

3300

 

 

By Jones..A/c

4200

Total

7500

Total

7500

Conclusion

From above report it has been concluded that main motive of financial accounting is communicating the true and fare view of organisation's financial performance and position, All accounting functions of business organisation are linked with reporting of financial performance and guided by principles of financial accounting. Evaluation of main purpose of financial accounting assists in providing a appropriate framework for decision making activities. Management also prefer financial accounting as it helps to determine objectives and goals of a business organisation. Reporting under financial accounting ensures compliance of policies, rules and regulation.

References

  • Agasisti, T. and Catalano, G., 2013. Debate: innovation in the Italian public higher education system: introducing accrual accounting. Public Money & Management. 33(2). pp.92-94.
  • Alver, L., Alver, J. and Talpas, L., 2013. Institutional pressures and the role of the state in designing the financial accounting and reporting model in Estonia. In Accounting in Central and Eastern Europe (pp. 91-120). Emerald Group Publishing Limited.
  • Barth, M .E., 2015. Financial accounting research, practice, and financial accountability. Abacus. 51(4). pp.499-510.
  • DRURY, C. M., 2013. Management and cost accounting. Springer.
  • Edwards, J. R., 2013. A History of Financial Accounting (RLE Accounting). Routledge.
  • Fourie, M. L., and et. al., 2015. Municipal finance and accounting. Van Schaik Publishers.
  • Hale, T. N., Hale, T. and Held, D. eds., 2012. Handbook of transnational governance. Polity.
  • Hall, J. A., 2012. Accounting information systems. Cengage Learning.
  • Jönsson, S., 2013. Accounting and business economics traditions in Sweden: A pragmatic view. In Accounting and Business Economics (pp. 203-219). Routledge.
  • Mullinova, S., 2016. Use of the principles of IFRS (IAS) 39" Financial instruments: recognition and assessment" for bank financial accounting. Modern European Researches. (1). pp.60-64.
  • Oulasvirta, L., 2014. The reluctance of a developed country to choose International Public Sector Accounting Standards of the IFAC. A critical case study. Critical Perspectives on Accounting. 25(3). pp.272-285.
  • Stice, E. K. and Stice, J.D., 2013. Intermediate accounting. Cengage Learning.
  • Tschopp, D. and Nastanski, M., 2014. The harmonization and convergence of corporate social responsibility reporting standards. Journal of Business Ethics. 125(1). pp.147-162.
  • Zeff, S. A., 2016. Forging accounting principles in five countries: A history and an analysis of trends. Routledge.
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