The scenario of this assignment discusses an evaluation over the requirements of accounting practices and models that can assist in resolving financial issues within an organisation. Furthermore, it determines financial regulations and rules which are required to consider while managing accounting practices of firm.
- Evaluate business transaction by using double entry book-keeping as well as extract a trial balance.
- Prepare final accounts for sole-traders, partnership, limited companies by considering accounting principles, conventions as well as standards.
- Design bank reconciliation in order to ensure that organisation's and bank records are appropriate.
- Provide rectifications in control accounts as well as shift recorded transactions from suspense to right accounts.
Financial accounting is a branch of managerial accounting which is used to summarise the financial information and accounts in terms of making financial plans and strategies. Financial accounting is considered as an art of presenting financial information and accounting records in systematic manner so that managers and accountants be able to summarise and consolidate the information for sorting the financial plans and strategies. This majorly associated with analysing the financial stability of organisation (Warren and et. al., 2018). There are type of financial information and details are presented in selected formats. These information are categorised in major three formats like income statement, financial position statement, cash flow statement. Financial information not only helpful for internal management and control but also helpful beneficial for shareholders of organisation. Main objective of financial statements is to define and analyse the financial position of organisation. Profit and loss accounts defines the profitability condition of organisation also helps stake holder to analyse the consistency of financial stability.
This report contains two parts. First part contains the business report which contains the meaning of financial accounting, regulations related to financial accounting, accounting principles and rules are also defined in this context. Conventions and concepts subject to consistency and managing the financial statements are also defined in this context. Second part covers the accounting principles, bookkeeping system, bank reconciliation, trial balance and ledger control accounts for large accounting records.
Elaborate financial accounting
Financial accounting has become primary need of business and organisation at present scenario. Business needs and aspects has become change as per changing business environment and organisations are adapting the financial accounting concepts and rules in organisational context. Financial management provides a path to manage the monetary needs and assist accountants to keep and maintain the financial records in perfect manner (Wang, 2014).
Financial accounting is considered important field of accounting which helps organisers to access and manage the economic aspects and financial performance of organisation. More over these information not only refine the procedure and concept of managing the financial resources of organisation. Companies produce financial statements to define specific routine schedule. There are major three financial statements are prepared in financial accounting with the help of stakeholders be able to determine the financial position and profitability of organisation. These financial statements are defined as follows;
Income statement: this statement helps to get information related to profit and expenditure for a year which is get ready by association to decide benefit and losses. With the assistance of salary proclamation proprietors, main parties and partners have the capacity to decide the benefit of association. Pay articulation is additionally considered as an income, costs, picks up and loses of association. It contains the business, administrations, and intrigue incomes. More over income statement helps to determine the overall expenditure incurred in order to get desired income. This is also called as profitability statement or profit and loss account.
Financial position statement: this statements covers all the information and details related to assets and the liabilities. Financial position statement also called as balance sheet. This statements is prepared on the basis of major accounting equation which is (assets = capital + liabilities). The sum of the liability and assets remain equal. This is one of the prime statement as per stake holder's perspective (Vyas, 2011). With the assistance of financial position statement investors and stakeholders be able to summarise the financial position of organisation. This also helps to consolidate the assets and the liability. Fixed assets, liabilities are defined in this context. There are type of information such as contingent liability and managing the financial performance of organisation.
Cash flow statement: it is one of the essential requirement of business to manage and control the flow of cash within the organisation and analyse the financial requirement for further use. There are three major activities are considered in this context in terms of analysing the financial flow of organisation. Cash flow from operating activity, cash flow from financing activity and cash flow from investing activity.
Change in equity: this statement present the information and details related to equity share capital, securities premium, reserves and surplus, redemption reserves etc. with the assistance of change in equity statements stakeholders and managers be able to understand the change in equity position of organisation in various terms. The major aspect which remain associated with analysing the equity position and reserves. Strong equity and reserve structure helps to attract the interest of investors and stakeholders.
Regulations relating to financial accounting
There are a few principles and controls are made as far as dealing with the money related activities and administration for better execution of budgetary tasks. Monetary Detailing Chamber (FRC) are made in regard of showing budgetary data in particular organization. Bookkeeping standards and gauges which are given by Sound accounting standards (GAAP). This is fundamentally remain related with taken a toll standards, going concern, coordinating rule, monetary element, pertinence, preservation and dependability of money related introduction. The first system of rules was calculated as Uniform System of Accounts (USOA) and Irish and UK GAAP issues rules and legislations in terms of making rules and legislations for maintaining and prepare financial statements (Skogstad and et. al., 2011). Significant ratio of accounting guidance often issued to emerge and explain accounting conventions by specialised industries. Specialised industries, as charities, pension, banking and insurance. Statements which are prepared as per these regulations and standards are called as statements of recommended practice (SORPs).
ASB (Accounting Standard Board) likewise gives enactments and principles identified with monetary explanations are additionally characterized in this unique circumstance. It also issues the task force statements which provides quick guidance on the recommended treatment of a particular transaction where contingent interpretation of a recommended accounting standard and treatment is required. These principles significantly encourages directors and bookkeepers to introduce the budgetary data and bookkeeping divulgence of bookkeeping strategies. Principles which are furnished under ASB remain related with investigating treatment of consumption and income structure of association.
IASB is of the regulatory which issues rules, methodologies and benchmarks subject to money related accounting and accounting exposure. IFRS which is known as Overall Budgetary Specifying Models are the gauges issues by IASB. GAAP (Appropriate bookkeeping principle) are taken after at all inclusive level. Overall affiliation which works business exercises in various countries grasp the benchmarks and standards of ISA and GAAP.
There are some rules and regulations also provided by the International Accounting Standard Committee (IASC) in terms of arranging in 1973 (Scott, 2015). The IASC produces accounting standards which are called as international accounting standards (IAS). There is a specific committee is made subject to monitor the activities and the task to produce new rules and legislations. It is important for organisations in terms of making the financial structure in various forms. Main objective of regulatory authorities and the regulatory bodies is to promote the intentional transparency and consistency with the financial statements prepared by organisations worldwide. There is no any force of law made in terms of adhering the international financial and accounting guidelines for organisations working at domestic level.
There are strategies working party was formed in 1997 and charged with reviewing with terms of structure and process. The structure of IASB of multiple elements such as Monitoring board (public capital market authorities), IFRS foundation trustees, international accounting standards boards, IFRS advisory council, IFRS interpretation committee.
Explain accounting rules and principles
Accounting rules: There are three basic rules of accounting that is very important, without which the accounting cannot be done. These rules are debit the receiver and credit the giver; Debit what comes in and credit what goes out; Debit all expenses and losses and credit all incomes and gains. These rules are discussed as under in brief: