Financial Accounting Assignment Help

Qualification - Higher National Diploma in Business

Unit Name - Financial Accounting

Unit Number - Unit 10

Unit Level - Level 5

Assignment Title - Applying Financial Accounting Rules and Principles in the Company

Learning Outcome 1: Record business transactions using double entry book-keeping, and be able to extract a trial balance

Learning Outcome 2: Prepare final accounts for sole-traders, partnerships, and limited companies in accordance with appropriate principles, conventions, and standards

Learning Outcome 3: Perform bank reconciliations to ensure company and bank records are correct

Learning Outcome 4: Reconcile control accounts and shift recorded transactions from the suspense accounts to the right accounts

You are a Junior Accountant in a medium sized accountancy and auditing company. As a part of the company annual appraisal process you have been asked by your direct manager to prepare report that define and explain the financial accounting and its importance in the business environment.

Order Unit 10 Financial Accounting - Higher National Diploma in Business Assignment help At Miracleskills.Com Today, And Bring Home Thoroughly Prepared Solution In No Time

Introduction:
Financial Accounting is all about preparation of books of accounts, its presentation in the form of summary, the analysis of the prepared accounts and reporting to appropriate stakeholders on the financial transactions that has taken place in a particular period. The financial statements prepared are mostly available for public use and the list of people who may be interested in the statements are banks, government, owners, suppliers, employees and investors.

In order to be promoted to a senior level, your manager told you that you need to make successful four (4) closed-book exams.

1. The report will include the following:

a) Define and explain financial accounting.

Definition and Meaning:
Financial accounting is an accountancy process in which the transactions are tracked, summarized and recorded in the form of different statements to provide a synopsis of the transactions that occur during a particular period of time. The transactions being monetary are represented in the form of the most important financial statements of the businesses like profits and loss account, balance sheet and cash flow statements(Mouck, 1989). In order to perform financial accounting, a number of accounting principles are required to be used. The selection of the principles depend upon a lot of factors which include the regulatory and operational requirements of the business and the reporting requirements prevalent in the country of operation. For example, In United States the US GAAP is followed, India follows IND AS and European Union nations follow IFRS. These principles have been discussed in the later segments.

Financial Accounting may be performed using cash basis or accrual basis of accounting. Many entities employ financial accountants who prepare the statements of the business as per the basis of accounting which have been set up by various boards for maintaining consistency and regularity among the adoption of accounting principles. The financial data which is used to perform financial accounting includes revenue transactions, expenses, assets, liabilities and equity. The statement of income includes all revenue and expense transactions which range from research and development to payroll. Assets, liabilities and equity are presented in the balance sheet.

The process known as financial accounting helps in determination of the net profit or loss of an entity at a particular point of time i.e. at end of the Income Statement. This component is posted to the Balance sheet under Equity as Retained earnings or accumulated losses along with other items of assets, liabilities and equity. The balance sheet is used by the owners of the business to ascertain the current position and future economic benefits.

As stated above, Financial Accounting may be performed using Accrual Method or Cash method. Some entities even use a combination of both. Usually, small organizations prefer adopting the cash method due to its simplistic approach. Large organizations mostly prefer the accrual system. Accrual system of accounting entails recording the financial transactions as and when they occur and revenue can be realised. It does not depend upon the actual realisation of cash. Cash Accounting on the other hand records transactions only when real exchange of cash is involved. In cash accounting, recognition of revenue is done on the basis of cash receipts and expenses are booked when expenses are paid in the form of cash.

The objectives of Financial Accounting can be listed below -
• Financial Accounting provides a permanent record to businesses of the transactions that are indulged into. These records may be required and used by businesses for multiple purposes like taxation, internal discussions, performance analysis, future plans etc. The permanent records generated by way accounting for all monetary transactions can be held for a long period of time and retrieved whenever required.
• Financial Accounting provides an aggregate measurement of the outcome of business. A business has several transactions every day. There are some profitable transactions while some loss making ones. Financial Accounting aggregates the impact of all the transactions over a time frame and provided periodic reports which help the business in aligning its operational activities.
• Financial Accounting helps to ascertain the credit worthiness of the entity. All entities require various resources for functioning. If the capital is short, it needs to be procured from Investors and for investors to provide funds to business, they require a satisfactory report on the ongoing operations of the business so that there is reasonable assurance that the business will earn profits. Past records of accounting help the investors in their decision making by providing them an idea of the credit worthiness of the business.
• Financial Information help in efficient use of existing resources. Internal Analysis can be conducted using Financial Statements which provide information on the use of resources along with the timings and a summary of all activities that took place through the resources. This helps management to assess their performance loopholes and perform better in future.
Having stated the various advantages and objectives of Financial Accounting, it is imperative to assess the limitations as well. First of all, Financial Accounting is not free of errors. There are high possibilities of errors despite strict regulations and rules. Moreover, accounting scams are very common in the modern era due to loopholes in the accounting system. The major limitations of accounting are -
• Financial Accounting is a subjective measurement which considers only monetary transactions. There are instances when the monetary value of certain transactions are not ascertainable. For example, depreciation in which case, accounting is bound to use an estimated amount. Such transactions make financial accounting subject to manipulation.
• Financial Accounting ignores Qualitative factors by attaching money value to everything. There are certain aspects of business which cannot be valued in monetary terms like Goodwill. Self-generated goodwill is ignored in accounting while purchased goodwill is recorded. This makes accounting subject to flaws.
• Financial Accounting excludes market dynamics like inflation and currency exchange rate fluctuations as the accounts are prepared in one currency which belongs to the place of operations. For example, the same asset may be purchased for ‘x' amount in the previous year and ‘y' amount in the current year. Although the purpose and utility of the two pieces of the same asset is same, they are valued differently in accounts based on their acquisition price. The impact of inflation and currency fluctuations is thus ignored.
• Financial Accounting ignores the concept of Opportunity cost which is a key element in decision making and can impact future decisions of the management.
However, despite limitations, financial accounting is a boon to the economy.In all, Financial Accounting has several aspects associated with it which are discussed in the report. The accounting conventions, standards, principles etc. together make the field of financial accounting a vast arena.

b) Explain financial accounting rules.

Rules of Financial Accounting:
The relevance and drawbacks of the financial statements emerge, in general, from the rules of accounting or its principles that decide the emergence. These guidelines were derived from traditions that were most commonly found to be beneficial in finance and trade (Robinson, 1998). The debit and credit scheme is centered at the core of the dual-entry system of bookkeeping. It is very beneficial, but then at the same point it is quite challenging to implement in practice. A knowledgeable executive can be expected to understand the scheme of debit and credit balances (Stolowy and Lebas, 2006). That being said, no business can afford such high cash expense for book keeping as it is usually performed by the staff members and the people working in shops.

This led to the creation of the Golden rules of accounting.
These rules turn complicated accounting rules into a collection of concepts that could be conveniently understood and implemented. Accounting involves basic golden rules mentioned below -
• "Debit Receiver and Credit Giver" -Personal accounts usually follow this rule. When any person or another business entity gives any type of asset to business, it increases inflow for the business and thus the giver is credited in the books of accounts. The converse of this, when the organization gives something to another person, it leads to an outflow and the other person needs to be debited.
• Debit whatever comes in and credit whatever goes out -This rule is applicable for Real Accounts. Real Account includes assets like Machinery, Building, Equipment etc. These accounts have a default debit balance. So whatever comes in, adds up to the list of real account and is therefore debited. Anything that goes out reduces the balance of real accounts or tangible assets and therefore is required to be credited.
• Debit all the expenses and losses and credit any incomes and gains -This rule is applied to all nominal accounts. In any business, the capital account is a liability as the business is treated as a separate entity from its owners. Thus, capital has a credit balance by default (Albrecht, Stice, et al., 2007). By crediting all the income and gains i.e. the inflows, the capital account is increased and the same happens vice versa i.e. capital account is debited or decreased in case of losses and expenses. This ensures that the system stays balanced.

c) Explain financial accounting principles, concepts, and conventions.

Accounting Principles, Concepts and Conventions:

Financial Accounting have various fundamental principles. These are -
• Monetary Unit - All transactions are required to be represented in the form of a single monetary unit. Financial Accounting does not account only for goods like the barter system (Macve, 2015). There are prescribed rules to deal with assigning value to transactions like in the case of depreciation, there are rates prescribed for the same.
• Going Concern - Financial Accounting considers the business to be a Going-Concern. Once formed, a business can end only on dissolution. The accounting principle of Going Concern assumes that the business will exist and continue as usual until the end of the next accounting year and there is no information of any dissolution of winding up. Because of this principle, accounting allows businesses to function on credit and account for the receivables and payables which intend to generate or lead to outflow of cash in the future. Even depreciation is charged in fixed assets assuming it will be used for many years as per this principle.
• Conservatism - This is one of the prime tenets of Financial Accounting. As per this principle, when there is doubt on the amount of inflows, the accountant should consider the lowest possible inflow while in case of outflow or costs, the highest should be considered. This is because conservatism principle implies preparing for the worst and hoping for the best. Inventories, for example, following this principle are recorded at lower of cost or net realizable value.
• Cost Principle - As per this principle, everything should be listed at cost price. Appreciation should be recorded only when realized. However, the recent changes in accounting counter this principle as Fair Value measurement is prescribed to present a more appropriate view of the financial statements.
The Accounting conventions list materiality, consistency and full disclosure in addition to conservatism.
• Full Disclosure - As per this convention, the users of the financial statements need to be provided with the information on all facts relating to the transactions for them to have the right interpretation of the statements. These disclosures may form part of the notes or the body of the financial statements itself.
• Consistency - The convention of consistency states that one a particular method is adopted foe accounting, the same is required to be followed for all subsequent events of similar nature. If consistency is not followed, comparison becomes difficult. However, this convention lists consistency only over time and does not include logical consistency.
• Materiality - This refers to the relative importance of a transaction. Accountants need to ensure that all material information is properly reported in Financial Statements. However, the statements should also be cost-effective.
Lastly, there arevarious accounting concepts like matching concept, timeliness, neutrality, faithful representation, prudence, completeness, historical cost, substance over form, money measurement concept and single economic entity concept. All these concepts lead to making Financial Statements concrete in all forms. In case of conflicts between concepts, the one best for an entity is required to be used.

d) What is the difference between Financial reports and financial statements?

Financial Reports vs. Financial Statements:

Financial Statements are part of Financial Reports. Financial Reports are reports on monetary matters having financial effects. These are used to transmit relevant information to users for their decision making. For example, Bank Statement, Aged Debtors report, etc. Financial Statements are also Financial Reports but have a more formal structure. While Financial reports can be prepared in any manner suitable to the users, financial statements have a more defined format to be used (Black, 2004). Financial Statements include the Income Statement, Statement of Financial Position, Statement of changes in Equity and Cash Flow Statement while financial reports is a wider classification containing various other documents. Financial Statements are mandatory to be prepared while reports are at the discretion of the management as these are used for internal purposes only. Although, there are no major differences, these terms carry different meanings in Accountancy.

Conclusion:
Financial Accountancy in each country is governed by its local laws as well as international accounting standards. Most nations have their own GAAP or generally accepted accounting principles to govern their financial accounting process. Apart from this, there is a set of international standards referred to as IFRS designed by the IASB which can be adopted by any nation (Walton and Aerts, 2006). This report has addressed various aspects of Financial Accounting and the segments highlight the importance of accounting along with the rules, principles and conventions which need to be followed.

Financial Accounting Finesse: Acing Unit 10 of Your HND Business Diploma with Confidence Through Diploma Assignment Help.

2. These four (4) closed-book exams will show that you have the knowledge, skills, and abilities to:

a) Correctly record transactions and produce an accurate trial balance by completing the balance off of ledger accounts, checking that each transaction is recorded in line with accepted accounting principles.

b) Apply appropriate and accurate calculations for the constructing of the final accounts.

c) Prepare accurate bank reconciliations that apply appropriate tools and techniques to check general accounts and balance sheets.

d) Produce accurate accounts that have been reconciled applying the appropriate methods.

Solution:

Journal Entries
These are the record of transactions which are maintained for both economic and non -economic transactions. It comprises of a particular format which is based upon dual system of accounting i.e. every transaction effect both debit and credit accounts. The total amount of debit side is equal to the total amount in the credit side. Journals are considered to be correct if it is balanced i.e. debit side equal to credit and if they are not same it is considered to be unbalanced. Journal entries, such as depreciation or bond amortisation, can record unique items or recurring items. Journal entries are generally entered in accounting software having different accounts like payables along with sub ledgers. For all transactions another business entity gives and value to organization, it leads to an inflow of resource and it must be credited in the books of accounts. The converse of this, when the organization gives something to another person, it leads to an outflow and the other person needs to be debited.The process of financial accounting helps in the determination of the net profit or loss of an entity at the end of the Income Statement. This component is posted to the Balance sheet under Equity as Retained earnings or accumulated losses along with other items of assets, liabilities and equity. The financial statements are used by the owners of the business to ascertain the current position and future economic benefits.

Journal

Ledger Accounts

An accounting ledger is prepared pertaining to each transaction and item which are necessary for preparation of balance sheet and income-statement transactions These are classified as store bookkeeping entries. The various ledger accounts that are to be prepared are cash, receivable accounts, investments, inventory, payable accounts, accrued expenses etc. The balances of the ledger accounts are then transferred for preparation of trial balance. It is an important tool in accounting that is used for preparation of most important financial statements like balance sheet, profit and loss accounts that reflects the financial position of the business organization. The ledger accounts have been prepared for each and every item and their closing balances are computed for transferring them to the trial balance worksheet.

Ledger

Trial Balance

Trial Balance refers to the worksheet which is prepared by transferring the closing balances of each ledger accounts. The total of all the debits and credits have to be equal while preparing trial balances. It is an important accounting tool that is being adopted by the company and on the basis of which all other statements are prepared. The statement has to be mathematically correct for accuracy of other financial statements. It helps in identification of correctness of the trial balances by detecting the errors like clerical errors, omission errors, totaling errors etc.

Conclusion

At the end of the LO1 Exam, it is clear that the first step in accounting process is to transfer each and every transaction to their respective debits or credits side based on the accounting principle of dual entry system. It gives clarity regarding the accuracy of the recording of various entries, transferring those transactions to their ledger accounts and preparation of the trial balances. It can be seen that the total of debits in trial balance equals total of credits in trial balance representing that the trial balance is a balanced one and it shows clarity and accuracy in recording of accounting transactions.

Navigate the Numbers with Clarity: Master Unit 10 Financial Accounting in Your HND Business Program with Personalized BTEC Assignment Help and Support.

LO 2 This examination is based upon the passing of adjustment entries in relation to various transactions that occur at the end of the accounting period or at the end of the month. The adjustment entries passed also have dual effect that is it affects both the debit and credit side of the accounts. The amount by which account gets debited equals the amount of credit side.

JOURNAL ENTRIES

After the adjustment entries are passed the ledger accounts for the accounts that have been affected through the adjustment entries are prepared. The closing balances are computed and then transferred to trial balances. When the clsoing entries are passed, all the expenses and income are transferred to the income statement/Profit and loss account for compuattion of profits of the period.

Ledger- Adjusting and Closing Entries

Adjusted Trial Balance - The adjusted balances are transferred from the ledger accounts to the adjusted trial balance account where the sum total of all debits equal sum total of all credits. This is the final balances of all the accounts and thus, the financial statements are prepared on the basis of the adjusted trial balance. The income statement is prepared on the basis of balances extracted in the adjusted trial balance. The statement of owner's equity portrays the change in owner's capital which occurs due to profits earned during the period and the drawings of the owner. After the preparation of all these accounts the final balance sheet is prepared that gives clarity regarding the financial performance of any company. It comprises of both assets and liabilities and thus, the amount of assets equals the amount of liabilities.

Adjusted trial Balance

Income Statement

Statement of owners' equity

Balance sheet

Closing Entries refer to those entries which are passed to close the nominal accounts like expenses, income, drawings and profit and loss account. When the closing entries are passed the drawings get transferred to capital account, expneses and income are transferred to profit and loss account/ income statement and the profit and loss account is then transferred to equity.This is the rule that is applied to all nominal accounts. In any business, the capital account is a liability as the business is treated as a separate entity from its owners. Thus, capital has a credit balance by default.

Need Instant Business Assignment Help Get it Now With Ease!!

Journal- Closing Entries

The post-closing trial balance is prepared after the closing entries are passed. Thus, in this trail balance only the items which belong to the balance sheet are reflected. The income and expenses account are replaced by the profit/loss which is further transferred to the capital account. This trial balance can only be used for preparation of balance sheet but cannot be used for income statement as it only reflects the assets and liabilities

Post- closing trial Balance

Conclusion

At the end of this LO 2 Exam 1 it has provided clear understanding of the importance of passing of adjustment entries and the preparation of adjusted ledger accounts. The transferring of adjusted balances to the trail balances and preparation of income statement and balance sheet. It also gives knowledge regarding the passing of closing entries and the presentation of post-closing entries trial balance.Financial Accounting provides an aggregate measurement of the outcome of business. A business has several transactions every day. There are some profitable transactions while some loss-making ones. Financial Accounting aggregates the impact of all the transactions over a time frame and provided periodic reports which help the business in aligning its operational activities.

Part 1
Statement of cash flows

The cash flow statement is prepared for analysing the flow of cash from different activities like operating activities, investing activities and financing activities. It can be prepared using direct and indirect method. The question provided have been solved by using the indirect method. The indirect method of preparation of cash flow statement involves changes in working capital which is not accounted for while preparing cash flow statement using direct method. The plant have been purchased for $ 1,20,000 out of which $ 1,00,000 is paid in cash and the remaining is paid through notes payable. Since notes payable is a non-cash transaction it is not accounted for preparation of cash flow statements. However, the payment for notes payable have been done it is accounted for as investing activity. Depreciation is a non-cash expense and thus, it is added while computing cash flow statement.

The treatment of changes in working capital are as follows :
- Increase in assets and decrease in liabilities lead to decrease in cash flows as the amount to be received gets delayed and for liabilities decrease it denotes that payments have been done.
- Decrease in assets and increase in liabilities leads to increase in cash flows as the amount is realized from assets and no payments have been made for liabilities.

Conclusion

The cashflow statement reflects the summary of cash transactions the details of cash and cash equivalents used in the company, if the cash inflow is lower than the cash outflow, then the company used the cash and cash equivalents to obtain the company's profit, and if it is higher than the cash outflow, the company faces the loss. The statement of cash flow is recognized from the three activities such as operating activities, activity investing and activity financing. The cash flows of the company have increased during the year symbolizing that the company has positive cash flows. It reflects the strong liquidity and solvency position of the company.

Part 2
The assets transferred by the partner to the partnership firm are recorded at current market value of assets and liabilities. In the given quetsion, both the partners contribute equally to the firm. Since Huda has contributed net assets of $ 66,100 to the partnership firm, the other partner Nader has also contributed equally in the form of cash to the firm.The balance sheet comprise of the assets and liabilities which have been contributed by the partners.

Journal

Balance sheet

Journal

Conclusion

The partnership accounts can be effectively prepared on the basis of contribution made by the partners in their ratio of capitals. It is decided by the partners through a proper agreement. The assets introduced by partners beocme the assets of the firm and vice versa for liabilities. The balance sheet comprise of the assets and liabilities which have been contributed by the partners. Drawings made by the partners are subtracted from their respective capital accounts.

Financial Accounting- (LO3+LO4)

1-
A bank reconciliation statement is a comprehensive summary that reconciles the bank record maintained by entity with the records maintained by the banks. It shows summary of deposits, withdrawals and other activities for a particular period affecting a bank account. It is a useful instrument of financial internal control used to prevent fraud.Bank reconciliation statements ensure the processing of payments and the deposit of cash collections into the bank. While preparing reconciliation statement the differences between the bank statement and book balances are identified and accordingly entries are passed.The Bank reconciliation statement helps in finding out the differences between the two and tracking the differences the two. Journal entries are passed for cash book prepared by the businesses to reconcile with the adjusted balances of the bank statement.

Bank Reconciliation

Journal

Conclusion

Bank reconciliation statement helps in analysis of the differences in the balances of bank book and the bank statement and helps in rectifying them. It is a widely used tool by the management of any company which helps to detect errors and frauds. A statement of bank reconciliation is a useful instrument of financial internal control used to prevent fraud.Bank reconciliation statements ensure the processing of payments and the deposit of cash collections into the bank.

2- A
Subsidiary ledger accounts are parts of ledger accounts. Customers subsidiary ledger accounts are prepared for each and every customer and accordingly there is carry forward of the balances to general ledger accounts. The balances from these accounts are then used while preparing balance sheet

Subsidiary Ledger; Customers (Debtors)

General Ledger; Accounts Receivable

2- B

General Ledger; Accounts Receivable

3-
For all the accounts for which indefinable accounts cannot be identified the entries are posted as suspense accounts. Later when the transactions are identified they are accordingly transferred to that particular accounts. Suspense accounts are highly used in accounts which helps to record those transactions for which required accounts are not identifiable.

Journal

Suspense accounts enable the posting of transactions before actual information that is sufficient for posting or required for posting is available for passing the correct journal entries. There may be transactions that are not recorded by the end of the reporting period without such transactions being posted, resulting in inaccuracy.However, it is worth remembering that items represent unallocated amounts which is reflected insuspense account. As a result, it is usually viewed negatively to create and transfer amounts to suspense account with outstanding balances on financial statements and it can prove to be weakness for the ones who refer to those statements.Through reviewing each individual transaction in the account, suspense accounts are cleared. The goal of reviewing items is to move the transaction as quickly as possible to the appropriate account.

The process which is undertaken to reconcile control accounts and clearing suspense accounts are by analysis of each and every transaction and finding out the account to which the transaction relates. After identification of the proper ledger accounts the accounts which have been transferred to suspense accounts are cleared and transferred to respective ledger accounts.

Conclusion
Suspense accounts proves to be an essential account which have been used in accounting for recording of transactions which cannot be identified. It helps in easy recording and completion of data recording and thus, records are maintained on the basis of accuracy and correctness of transactions.

Engage a Writer to Resolve Financial Accounting Assignments in the UK

For bespoke HND assignment Help in the UK, reach out to us for tailored essay writing services at budget-friendly rates. With a team of seasoned and proficient writers, we guarantee top grades for your assignments.

Our Proofreading Writing and Editing Service in the UK encompass assistance with assignments in fields such as Business, Management, Engineering, Accounting, Dissertation, and more.

For further information, please reach out to our customer service representatives. We assure privacy, confidentiality, accuracy, originality, and plagiarism-free content. In the event of dissatisfaction with the delivered work, we offer a hassle-free money-back guarantee.