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Financial Accounting Principles

University: UK College of Business and Computing

  • Unit No: 8
  • Level: Undergraduate/College
  • Pages: 15
  • Words: 3750
  • Paper Type: Assignment
  • Course Code:

    M/508/8849 (RCF)

  • Country: UK
  • Downloads: 1
Question :

The objective of this report is to evaluate accounting and financial practices that can assist an organisation to resolve its finance related issues appropriately. In this regard, analysis of such requires to base on:

  • Discuss business transactions by using double entry bookkeeping by determining information related to trial balance.
  • Provide a discussion over final accounts in the context of partnerships, sole-traders and limited companies.
  • Evaluate bank reconciliations in order to ensure that bank and company records are correct.
  • Analyze reformation of control account and shift the records from suspense to right accounts.
Answer :

INTRODUCTION

Finance is considering as one of the crucial aspects for an organisation. It is uses for the purpose of making effective planning and allocating future aims and objectives within an accounting period of time. It is known as of the vital field of accounting those are concerned with the summary, analysing and reporting financial transaction in pertaining to all business transaction those are discussed during the period of time. This project report is all about various crucial aspects those are associated with accounting principles.

All necessary financial statements those are prepared by the company can be analyse by using appropriate tools and techniques. This consist of formulation of financial records that are available for public consumptions. Overall this report guides an organisation to attain more reliable outcome in case all statements are providing sufficient amount of gain in coming period of time. Analysis of bank reconciliation is done effectively in order to determine total cash balance of the company (Scott, 2015).

Business Report

(a): Meaning of financial accounting

Financial accounting is one of the special branch of accounting which track of overall financial transactions that are done within an organisation. It is used to be based on certain guidelines, transactions that are recorded, summarise and present in preparation of financial statements. With this all relevant data associated with the financial condition and position of the company easily be analyse in effective manner. This information is then after use by different investors and stakeholder those are connected with the company in order to make relevant decision regarding, whether to make invest in future projects of a company. The financial statements also aid overall supplies in deciding, whether sufficient amount of raw material is being provided by the company through judging their overall condition in effective manner. This financial report is done with use of certain goals that are based on overall profitability of an organisation (Agoglia, Doupnik and Tsakumis, 2011). The various companies select various accounting systems that are prepared by using standard bodies such as IFRS etc. Financial accounting that is being done in order to keep in views that standards and their duties of managers to be shown in financial statements of the company. Some crucial statements are discussed underneath:

Income statements: According this accounting reports a company’s financial performances during a particular period of time. It has been assessing by using a summary of business activities that are incurs their earning and expenses from various activities such as operating and non-profit aspects. It assists companies in evaluating, whether the company is making earning, profit and losses. The transactions related to operating gains, gross and net profit are determining in overall profit and loss statements of the company.

Balance sheet: This seems to be one of the crucial statements of the company which used to provide specific information about all detail aspects of assets and debt a company is having with them. By using this statements, financial position and stability in respect to other company’s positions are taken into account (Zeff, 2016). Financial organisation and other stakeholder determine their financial statements for providing sufficient loans and investing in the companies.

Cash flow statements: This seems to be one of the crucial statements which will be used to determine inflows and outflows from various activities of an organisation that are collected from various operating activities, investing and financing activities. This statements enable managers to detect the overall fluctuations of cash during accounting period of time.

Changes in statement of equity: It is known as more similar statements of alteration of all necessary changes in partner’s equity for a various taxpayer’s equity for a government financial reports. It records all necessary changes that are done in capital balance of an organisation over a given period of time.

(b): Regulation associated with financial accounting

Financial accounting standards is concern with private, non-profit organisation those are setting bodies. Their role is to establish and make modification in GAAP as per the interest of public. Regulators used to apply those two effective system for managing and controlling about operators report their financial outcomes during an accounting period of time. There are no any current legal needs that a companies used to report on extent to which their activities are harmony with essential demand or sustainability development. Current reporting and practices are having only more connection with overall sustainability of an organisation. However, UK system reports on progresses towards attempts to incorporate overall needs of sustainability into the economic overall life of reports (Horngren and et. al., 2012). The financial data users are very wide and diversified range as per the financial accounting. Because of such modification the data needed to every individual is required for plenty of ways. To maintain all rules and regulations, various regulatory bodies are created by following IASB etc. The ASB is another important accounting norm which are used by the company during formulation of financial reports. These standard used to provide accounting regulation that can assist managers and accountant in formulating financial records through using financial data of the company

(c): Accounting principles and regulations

In every business organisation, it is based on various common rules and regulations that are being adopted or proposed by using certain guidelines those are needed to be taken during formulation of appropriate statements. There are various rules and concepts that are govern appropriate accounting. It consists of major three rules that basic accounting principles and regulations, the detailed rules and policies those are being issued by FASB and their predecessor the accounting principles board. It every industry distributes their financial statements to public, it is needed to implement GAAP principles during formulation of various statements. Further, in case company overall stock is publicly traded and required financial records be audited by a skilled accountant (Warren and Jones, 2018). Below mentioned various accounting principles and guidelines together are discussed effectively. Some of them are:

  • Cost principles: As per as accountant is concern, they used to consider cost as those amount which is spent during an items were originally obtained. For this particular reason, the total value indicates on financial statements those are referred to be recorded on historical cost basis. Hence, an assets amount does not reflect the total amount of income a company which will be receive if it is sell the asset at current period of time.
  • Full disclosure principles: there are certain information which is to be made by investors through using financial statements that data would be disclosure within prepared statements. It is related with basic accounting aspects that taken as for attaining more suitable results in coming period of time. It is requirements that are related with publicly traded companies those are releasing and provide free exchange of facts that are relevant to their continuing business operations.
  • Going concern principles: This types of accounting aspects assumes that a company will continues to exist for longer period of time in order to attain their aims and objectives into the allotted time frame. In case accountant believe that, the condition of company is not so effective then the accounting books of that particular companies accounting books are closed for next coming time.
  • Matching principles: This accounting principles need for companies to make use of accrual basis of data. This particular principle need that all expenses to be matched with total earnings of the company. It cannot be measure the future economic benefits of all things like advertisement the accountant charges (Henderson and et. al., 2015).

Regulations and rules:

There are certain accounting rules which will be consider for effective recording of financial transactions those are done within an accounting period of time. Some of them are mentioned underneath:

  • Personal account: It is known as one of the effective account which is being used by an individual for that persons that are own requirements. The accounting rules says that debit the receivers and credit all amount to givers. Some crucial examples, capital and drawings.
  • Real account: Such kind of account is related with nature of assets those are used by an organisation. As per this rules, debit what comes in and credit all values those are goes out during the period of business operations.
  • Nominal account: This seems to be utmost important financial transactions that are done at the time of every financial period. The rules provide information about debits all expenses and losses and credit all incomes and profit.

(d): Accounting convention and concept of consistency and materiality

It is known as common aspects of accounting that are used for the recording of a business transactions. It is helpful in those situations which is not having any kind set guidelines in accounting standards that are govern during period of time. There are various effective types of accounting conventions that are held responsible for betterment the growth and gainfulness for an organisation. Some of them are:

Consistency: It would be required to select most appropriate accounting tools and techniques that are made for the adjustments on regular basis. Alteration can only be done in which new methods it adopted by the company (May, 2013). There are certain examples that are being consider for examine overall strength and financial position of the company.

Materiality: This seems to be one of the effective accounting conventions which are consider for making influenced the economic decision of users. This concept is universally attainable that all material aspects are to be disclosed by the company. 

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