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Concept of Management and Financial Accounting

University: The London College

  • Unit No: 6
  • Level: Undergraduate/College
  • Pages: 11 / Words 2796
  • Paper Type: Assignment
  • Course Code: ACC80008
  • Downloads: 647
Question :

Financial accounting is the important areas for all the business entity. There is vast difference in the management and financial accounting

  • Record all the business transactions by using double entry book-keeping, and maintaining the trial balance.
  • Make final accounts for sole traders, partnerships or limited companies with conventions and standard.
Answer :
Organization Selected : David Michael & Co.


Financial accounting plays very important concern for every business entity. There is huge difference from management and financial accounting as it is dependent and independent respectively. The present report is providing brief discussion about double entry book keeping and capability for extracting trial balance along with transactions of purchase in general ledger. It had also articulated about process of preparing final accounts in context of partnerships, limited organization or sole traders.


Financial accounting is a system where whole information about finance with respect to any specific business is being collected, accumulated, analysed and represented in a standard format. It is considered as a branch which is specialised on the basis of accounting and it keeps record of all financial transactions of any specific business entity. This information could be used on the basis of given standard guidelines. All the accounting principles could be optimised as this is established in an appropriate format. The financial statements are issued by business entities on regular schedule which is set by board of directors or top management. It could also be interpreted as entities whose aim is to increase stakeholder’s value. All these framed reports of financial accounting set a benchmark for determining level and function of efficiency on the basis of board and management. The main objective of this financial accounting is to provide information on basis of requirment in context of decision making process related to economy in very sound aspect.


1. Articulating journal entries of every transaction

Journal entries

Journal entries is a format for tracing every transaction in context of business as per their particular records. It can be easily recorded in general ledger as well but it has various restrictions and it is specifically introduced in general ledger. The journal entries have its various implications for preparing financial statements. Main aim of this specific book is to trace each business transaction which is recorded at two places so it is known as double entry accounting (Zimmerman and Yahya-Zadeh, 2011). It is not applicable for the purpose of common transactions in context of invoices and billing due to availability of various software as it helps in automatic preparation of accounting records.

Ledger Book

The account of ledger is indicated as record which has its applications for purpose of segregating and storing different transactions on basis of profit and loss statements and balance sheet. It also provides help for presentation of formal ledger of firm's financial statements along with the account of debit and credit as it is validated along with trial balance as well. All the financial transactions are recorded in ledger account (Pratt, 2013). For the purpose of preparation of financial statements, there is huge requirement of information about each account as it comprises of accounts on the basis of liabilities, assets, expenses, owner's equity and revenue. It had gained huge importance as books of account due to reason it had appropriate classification of any specific firm. At the ending of accounting period whole information is on basis of each transactions.

Bank Account

Interpretation: The above table is ledger account of bank which consists of various credit transactions of cash, insurance, rent and account payable. There is absence of any debit entry so, balance which has been brought down will be sum of credit transactions as 5325.

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Cash Account

Interpretation: The above table is indicating ledger of cash account as this consists of huge number of transactions. It consists of both debit and credit entries in which debit side is the highest as it includes capital, bank and sales account as 79100. On the contrary, expenses and equipment are credited for 3030 where balance should be brought down as 76070 is extracted from specified cash ledger.

Purchases account

Interpretation: The above ledger is indicaring purchase account where is absence of credit entries as it consists of debit entry for accounts payable as 18000. The same amount will be brought down.

Sales Account

Interpretation: The above table is indicating ledger of sales account which has absence of debit entries as every sales transaction had been credited through cash and accounts receivables. The amount 26000 will be brought down by viewing above scenario.

Accounts Receivables

Interpretation: The above table is indicating account receivable account which is specified in two formats in which 1st one is indicating debit of sales by 12000 which will be carried downwards. The other table is indicateing both debit and credit side where the highest side is credit from 18000 and debit amount is of 5000. So, accordingly 13000 would be carried downwards.

Computer equipment account

Interpretation: The above ledger is representing computer equipment account on cash basis which is debit from 3000 as this amount is brought downwards due to absence of credit transactions.

Capital Account

Interpretation: It is considered as an essential ledger account as it specifies the amount of capital which has been debited or credited. As there is presence of transaction of 65,000 which cash as in capital account which brought downwards as well.

You may also like to read: The Implication of Management Accounting

Rent Account

Interpretation: Above table is depicting picture of all transactions on the basis of rent which is debited from bank as 150 and similar amount has been brought downwards.

Insurance Account

Interpretation: The above table is indicating ledger account of Insurance which had debited 75 through bank and due to absence of credit entry, it will be brought downwards.

Expenses Account

Interpretation: The above table is depicting ledger of expenses account as there is presence of only one transaction which debited via cash as 30 and it will be brought down because of absence of credit transaction.

Trial balance

Trial balance is considered as closing balance list related to ledger account on the basis of duration as it is considered as an initial step for process of preparation of various financial statement. At the ending of accounting period, it is framed for observing such financial statements. There is an appropriate segregation of ledger balances in debit and credit. It consists of expenses which is traced on debit side in trial balance and credit side comprises of capital, income and liabilities. It also helps in ensuring that every transaction of debit is stated and simultaneously, it replicates the concept of double entry in accounting. If there is presence of variation of both sides in context of sum then it should resolve and investigate ir on prior basis for preparation financial statements (Sharma and Panigrahi, 2013). It also identifies and rectify specific errors. In the same series, for preparation of trial balance there is requirement of fully or balancing off to ledger account as it could be done by appropriately listing closing balance which had been extracted from ledger account or which is brought down on credit or debit balance.

Balance off rule

Account DR CR
Accounts receivables ac   12000
Cash ac   76070
Purchase ac   18000
sales ac 26000  
insurance expenses ac   75
Accounts payable ac 13000  
Rent expense ac   150
Bank ac 5325  
Computer accessories ac   3000
Expenses ac   30
capital ac 65000  
Sum 109325 109325


Income Statement

It is also known as Statement of Profit and Loss as it is replicated as an essential financial statement for the purpose of assessment of performance of firm along with financial stability. It specifies all revenues and expenses of business of given duration as it identifies losses. This statement is interpreting growth of top line in context of net income and along with this bottom line is also elaborated (Henderson and, 2015). The financial progress had been judged of entity within examined duration.

Income statement as per ending year

Particulars Amount Amount
Opening stock   9500
Add: Purchases 75000  
Less: Purchase returns 1500 73500
Total sales 125000  
Less: Sales returns 1000 124000
Closing stock   1000
Gross profitability margin   42000
Depreciation expense   5000
Salaries and wages   13200
Rates and Rent 1500  
add: outstanding rates 340 1840
bad debts occured 1200  
less: provision (old) 934  
add: bad debts (new) 650 916
Postage   900
Insurance 7500  
exclude: prepaid insurance 411 7089
interest gained   1000
Rent gained 4850  
Less: Unearned rent 490 4360
Total expenses   34305
Net profit margin   7695

Balance sheet as per ending year

Particulars Amount Amount
Bank   10594
Cash   340
accounts receivables 12500  
Less: bad debts 650 11850
ending inventory   1000
Prepaid insurance   411
Motor van 25000 24195
less: depreciation cost 5000 20000
loan   100000
Total assets   144195
Capital 120800  
less: Drawing expenses 5150  
Add: net Income 7695 123345
Accounts payable 3900  
Unearned rent 490  
Outstanding rates 340 4730
accumulated depreciation 5400 5400
Total liabilities   144195



Representing Bank Reconciliation Statement

This statement helps in extracting, explaining and understanding various differences of balances which is included in bank statements and accounting records as well. It is largely applicable for depositors. This is indicated as normal situation according to entity's balance as per accounting record which has huge variations from amount according to bank statement due to alterations in time. All transactions which are recorded by any specific entity which had been updated in bank statement after particular time lag (Bank Reconciliation statement, 2018). Its specific aim is to determine various discrepancies in accounting record of organization and bank's record due to time variations. If there is presence of BRS on monthly basis then it would assist daily tracking of cash flow of business entity.

Particulars Amount (in £) Amount (in £)
Balance according cash book (Dr)   1760
Cheque issued on basis of D Park but not conferred for the payment 270  
Payment transferred by Mr. Petal in bank of Akram 1070  
Amount Withdrawal for personal use 105 3530
Dividend gathered by bank 325 1770
Insurance paid by Tesco to bank in context of fire 170  
Monthly talk bill paid by bank 56  
Cheque attributable in the bank statement 186  
Bank pleading 25 437
Balance as (per pass book Cr)   3093


Statement for rectification

It is replicated as statement which is used for rectifying different error for omission as such its result is omitted for recording any specific transaction.

Date Particular Debit Credit
1. Cash ac dr To bank ac To suspense ac 670 670
2. G Tahir ac dr To suspense ac 650 650
3. Electricity bill expense ac dr To suspense ac 790 790
4. Motor vehicle expense ac dr To cash ac 500 500
5. Cash ac dr To motor vehicle ac 500 500
6. Sales ac dr To suspense ac 270 270
7. L Samantha ac dr To cash ac 190 190
8. Suspense ac dr To D John ac 384 384

Suspense account

This account is framed for recording differences in context of trial balance as its specific adjustments is on temporary view but they are appropriately rectified before preparation of final accounts (Barth, 2015).

Particulars Amount Particulars Amount
    To cash ac 670
    To sales ac 650
To D Jhon ac 404 To sales ac 270
To balance c/f 1976 To electricity bill ac 790
  2380   2380


It could be concluded from above report that financial accounting is very important aspect before preparing financial statements. This plays vital role in every business entity whether it is small or big, financial stability and position is general information. It had been articulated from above report that the structure of any business entity should be appropriate and maintained properly which is done by financial accounting. Further it could be summed up reflecting importance of each financial statement for determining financial performance of any business entity.

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