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Financial Accounting (Project 2)


Financial accounting is the process of formulating different types of statements that helps to analyse organisational position and actual financial status. For all the stakeholders of an organisation it is very important to analyse financial information as it guides them to make effective decisions. If the financial position of a company is not strong than no investor and shareholder will invest in the company and it will become more difficult to be competitive in the market (Deegan and Ward, 2013). This project report is aims at the use of management accounting techniques to resolve financial problems that are faced by an organisation in which a junior accountant will figure out the reasons behind the variation between cash and bank book. Comparison of direct debit and different aspects of an organisation, application of bank reconciliation statement, rectification entries and suspense account have also been discussed under this report.

Task 3

Applications of bank reconciliation process

  • Revised cash Book (as per bank balance)



Dr. balance



Cr. Balance


Balance as per cash book



Insurance paid



Cheque not yet presented



Monthly bill



Transfer from mr patel



Cheque from arif






bank charges



Dividend received



By balance as per pass book








From the above it has been analysed from the updated cash book that opening balance of cash is 1760 and closing amount of cash is 3093 which is going to be transferred in bank book or pass book (Budding, Grossi and Tagesson, 2014).

Comparison of direct debits with standing order, bank charges, dishonour cheque:

Direct debits: 

It is a facility which is provided by the to the depositors in which a outsider or a third person can transfer money from one account on the agreed date with another party. It is mainly used to pay the bills. In other words it can be deified as the instruction which is gives by a particular person to the bank to pay or receive deposits on a particular date. It is considered as the safest method of payment as it an automated method which is used all around the world by end number of individuals. Banks provides facility to some of the clients to withdraw money from another person's account (Huizinga and Laeven, 2012).

More Suggestions:

Standing orders:

 This facility is provided to some selected customers for the purpose of enhancing their satisfaction level by providing effective services. It is mainly based on the specific authorisation. In this facility the who control is in the hand of clients and bank have to follow the instruction of the customers to transfer a particular amount from their account to another account so that errors can be ignored. This can result in certain types of issues that are as follows:

  • When all the control remain in the hand of cust0oe4mrs than bank cannot interfere in any type of transaction.
  • It results in contingency because it cannot assure that all the clients are paying appropriate amount which is required to be paid (Maskell, Baggaley and Grasso, 2016).

Bank charges: 

Banks are considered as the most reliable financial institutions as money al ways remain safe if it was deposited in bank and the individuals can withdraw the amount whenever it is required. Bank charge a fix amount for the services that are provided by it to all its clients. Its services includes, ATM, mobile banking, net banking, overdraft limit and other facilities. Bank charges are mainly fixed by the bank and it is decided according to the services that are used by the customers. Following are the some charges that are charged by the banks:

  • As banks provide ATM services to the clients and a certain amount is deducted by the bank from the bank account of customers as bank charges.
  • Internet bank services are also used by the customers of bank and specific charges are also imposed by the bank on this service.

Dishonour cheque: 

It can be defined as the bounce cheque which is presented in the bank but bank refuses it due to some specific reason. These reasons are insufficient bank balance in the bank account, torn cheque etc. It is a criminal offence for the clients if they are presenting  a cheque willingly that can be dishonoured by the bank (Dishonoured cheque, 2017). Following are the reasons for dishonour cheque:

  • Error and commission:If the information provided on the cheque is wrong than it can be declared as the dishonoured cheque (McEnroe and Sullivan, 2013).
  • Fraud:If a cheque is drawn for the purpose of fraud or it can conduct a fraud in future than it will be declared as a dishonoured cheque by bank and a strict act6ion will be taken by the bank.


Direct debit

Standing orders

Banks charges

Dishonour cheques

Bank provide facility to the customers in which they can withdraw amount from the bank account of a third person.

In this option the bank works under the guidance of clients and also provide the facility of withdrawing amount form the third party.

There are various types of charges that are imposed by the bank on the customers for the services that are provided to the clients.

When a cheque is torn or having wrong information than it will be considered as the dishonour cheque.

Task 4

Rectification entries and suspense account

Rectification entries are passed by the accountants of the organisation when a wrong amount is recorded in one account of a wrong entry is passed by them earlier. Main purpose of these entries is to match the trial balance (Shah, 2013).

Suspense account is made when trial balance is not matching and cause for the variation cannot be identified than a suspense account is created and all the amount of arrears is recorded in suspense account.

Journal entries:

Suspense account:


Debit amount


Credit amount

Bank account


cash account


To balance b/d


Sales account




Balance c/d







From the above project report it has been concluded that financial reporting is very important to all the organisations as it helps to identify the financial issues that are faced by an organisation. It helps to find solutions for all the identified issues. All the companies record some rectification entries when financial statements do not match and than create a suspense account in which all the amount of error in recorded. Accountants of an organisation should follow all the principles of accounting so that transparent financial statements can be formulated in order to present a good image in front of its stakeholders.


  • Budding, T., Grossi, G. and Tagesson, T. eds., 2014. Public sector accounting. Routledge.
  • Deegan, C. and Ward, A. M., 2013. Financial accounting and reporting: an international approach.
  • Huizinga, H. and Laeven, L., 2012. Bank valuation and accounting discretion during a financial crisis. Journal of Financial Economics. 106(3). pp.614-634.
  • Maskell, B. H., Baggaley, B. and Grasso, L., 2016. Practical lean accounting: a proven system for measuring and managing the lean enterprise. Productivity Press.
  • McEnroe, J. E. and Sullivan, M., 2013. An examination of the perceptions of auditors and chief financial officers regarding principles versus rules based accounting standards. Research in Accounting Regulation. 25(2). pp.196-207.
  • Shah, P., 2013. Financial Accounting. OUP Catalogue.
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