Pass MeritLO1 Record business transactions using double entry book-keeping, and be able to extract a trial balanceDistinctionD1 Apply trial balance figures to show which statement of financial...

BTEC HIGHER NATIONAL DIPLOMA (HND) IN BUSINESS
FINANCIAL ACCOUNTING
Table of Contents
Introduction    4
Case 1 (M1, D1)    4
Part 1: Trial balance and its Importance (P1)    4
Basic Rules for preparing financial accounts    4
Ledgers    4
Part 2: Trial Balance (P2)    8
Case 2 (M2, D2)    8
Difference between financial reports and financial statements    8
Different types of financial statements    8
Consistency concept    9
Depreciation    9
Accrual    9
Material Disclosure    9
Final Accounts for Examples, Analysing Profit-Loss Accounts, Cash Flow Statements and Balance Sheet with Appropriate Calculations (P3)    9
a) Prepayments    9
) Accruals    10
c) Depreciation    10
Final Accounts for Examples of Sole Traders (P4)    12
Case 3 (D3)    12
Meaning of Bank Reconciliation Statement (BRS)    12
Requirement of BRS    12
Bank Reconciliation Process (BRP) (M3)    12
Parties interested in outcome of reconciliation    12
Bank Reconciliation Statement (P5)    13
Case 4    13
Process of Reconciling Control Accounts and Clearing Suspense Accounts Using Examples (P6)    13
Meaning of Control A/C (M4)    13
Uses of Control A/C    13
Suspense Account- Meaning and Uses    14
Requirement of reconciliation of accounts    14
Role of debtors and creditors A/C    14
Suspense A/C (D4)    14
Conclusion    15
References    16
Introduction
Financial Accounting is the process of identifying, recording, summarising and analysing the financial events resulting from business operations over a period. Basic knowledge of accounting is required at every stage of business. Preparation of trial balance, and financial statements, form an integral part of managerial accounting. This assignment deals with the preparation of trial balance, adjustments relating to depreciation, accrual concept and prepayments. Reconciliation is an integral part of the accounting process and is shown in the assignment to identify e
ors. The assignment also ensures use of the concept of suspense account to deal with the e
ors in the primary accounting entries.
Case 1 (M1, D1)
Part 1: Trial balance and its Importance (P1)
Trial balance is a statement of the total of debit and credit balances of all the ledger accounts that have been prepared for checking arithmetical accuracy. It is prepared at the end of the accounting period, once the accounts are closed. According to the opinion of Armstrong, Glaeser and Kepler (2017), the total of both the sides of the trial balance should match. It helps in preparation of profit and loss statement and the balance sheet. It indicates any inaccuracy in calculations.
Basic Rules for preparing financial accounts
There are certain basic rules for the preparation of financial accounts under double entry system of bookkeeping. As per the perspective of Balakrishnan, Watts and Zuo (2016), all the expenses are to be debited whereas all the incomes are to be credited. Any addition is asset or decrease in liability is to be debited. On the other hand, any decrease in the value of an asset or an increase in liability is to be credited. The financial events are to be recorded in the journal entry initially followed by the ledger accounts. At the end of accounting period, the balance of ledger account is posted in the trial balance. The financial statements are prepared using trial balance.
Ledgers
    Rent A/C
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Cash A/C
    15000
     
    By Profit and Loss A/C
    15000
     
     
    15000
     
     
    15000
    Cash
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Capital A/C
    500000
     
    By Rent A/C
    15000
     
    To Sales A/C
    32000
     
    By Equipment A/C
    8000
     
    To Debtors
    15000
     
    By Wages A/C
    6200
     
    To Sales A/C
    40000
     
    By Creditors
    12000
     
     
     
     
    By Capital A/C
    500
     
     
     
     
    By Salary
    700
     
     
     
     
    By Balance Ca
ied Down
    544600
     
     
    587000
     
     
    587000
    
    Equipment
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Creditors A/C
    12000
     
    By Balance Brought Down
    20000
     
    To Cash
    8000
     
     
     
     
     
    20000
     
     
    20000
    Sales
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Profit and Loss A/C
    139000
     
    By cash A/C
    32000
     
     
     
     
    By Debtors A/C
    27000
     
     
     
     
    By cash A/C
    40000
     
     
     
     
    By Debtors A/C
    40000
     
     
    139000
     
     
    139000
    Debtors
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Sales A/C
    27000
     
    By Cash
    15000
     
    To Sales A/C
    40000
     
    By Balance Brought Down
    52000
     
     
    67000
     
     
    67000
    Wages
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Cash
    6200
     
    By Profit and Loss A/C
    12400
     
    To Outstanding Wages
    6200
     
     
     
     
     
    12400
     
     
    12400
    Outstanding Wages
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Balance ca
ied Down
    6200
     
    By Wages
    6200
     
     
    6200
     
     
    6200
    Creditors
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Cash
    12000
     
    By Equipment
    12000
     
     
     
     
     
     
     
     
    12000
     
     
    12000
    Capital A/C
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Cash A/C
    500
     
    By Cash
    500000
     
    To Balance Brought Down
    509500
     
    By Computers
    10000
     
     
     
     
     
     
     
     
    510000
     
     
    510000
    Salary
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Cash
    700
     
    By Profit and Loss A/C
    700
     
     
    700
     
     
    700
    Phone Bill
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Outstanding phone Bill A/C
    1800
     
    By Profit and Loss A/C
    1800
     
     
    1800
     
     
    1800
    Outstanding Phone Bill
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Balance Brought Down
    1800
     
    By Phone Bill
    1800
     
     
    1800
     
     
    1800
    Electricity Bill
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount (£)
     
    To Outstanding Electricity Bill
    3800
     
    By Profit and Loss A/C
    3800
     
     
    3800
     
     
    3800
    Outstanding Electricity Bill
    D
    C
    Date
    Particulars
    Amount (£)
    Date
    Particulars
    Amount...