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Financial Accounting Principles

Student's Name

Institutional Affiliation

Course Number and Name

Professor's Name

Assignment Due Date

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Financial Accounting Principles

Part 1

This section presents the Sales day book- representing all sales made on credit terms

(debts), purchase day book- describing all credit purchases (credits) made by Paul Ramsay Ltd. It

will also present purchase and sales return day books recording all returned purchases and sales.

Lastly, a dully balanced cash book with all relevant entries will also be generated.

Sales Day Book

Date Particulars Invoice Amount (£)

01/09/20 Levison & Co. 9001 1800

06/09/20 Levison & Co. 9002 2640

11/09/20 Beaver & Leaver 9003 8800

12/09/20 Beiber & Love 9004 11040

18/09/20 Lather & Bathe 9005 27840

28/09/20 Beiber & Love 9006 44880

September 2020 Total Credit Sales 97,000

Purchase Day Book

Date Particulars Invoice Amount (£)

03/09/20 Bull & Pull 3472 1920

08/09/20 Bull & Pull 3581 2640

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12/09/20 Makey & Miles T004 5880

17/09/20 Hindel Porter A908 12960

September 2020 Total Credit 23,400

Purchases

Sales Returns Day Book

Date Particulars Credit note Amount (£)

06/09/20 Lather & Bathe 901 1680

08/09/20 Handers & Make 902 2640

15/09/2020 Levison & Co. 903 192

September 2020 Total Sales returns 4,512

Purchase Returns

Date Particulars Credit note Amount (£)

09/09/20 Bull & Pull T/3472 197

24/09/20 Mackey & Miles Ma044 960

September 2020 Total Sales returns 1157

Cashbook

PAUL RAMSEY LTD.

TWO COLUMN CASH BOOK FOR THE MONTH OF SEPTEMBER, 2020

DR. CR.
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Date Particulars Cash (£) Bank (£) Date Particulars Cash (£) Bank (£)

01/09/20 Balance B/D 5000 01/09/20 Balance B/D 7000

13/09/20 Debtor 2460 06/09/20 Wages 1800

Balance C/D 10,656 10/09/20 Rent 1000

10/09/20 Rates 756

20/09/20 Creditor 4360

Balance C/D 3,200

5,000 13,116 5,000 13,116

Balance B/D 3,200 Balance B/D 10,656

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Part II

Paul Ramsey Ledger Accounts

DR BANK A/C (Asset A/C) CR

Date Particulars £ Date Particulars £

01/01/20 Capital 10,000 03/01/20 Computer 1,200

04/01/20 Bank loan 10,000 05/01/20 Office Equip. Ltd 400

06/01/20 Capital 100

Balance C/D 18,300

20,000 20,000
Balance B/D 18,300

DR CAPITAL ACCOUNT CR
Date Particulars £ Date Particulars £

06/01/20 Bank 100 01/01/20 Bank 10,000

Balance C/D 9,900

10,000 10,000
Balance B/D 9,900

DR FURNITURE ACCOUNT CR
Date Particulars £ Date Particulars £

02/01/20 Office Equipment 800 Balance C/D 800

Ltd.
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800 800
Balance B/D 800

DR OFFICE EQUIP LTD. ACCOUNT CR

Date Particulars £ Date Particulars £

05/01/20 Bank 400 02/01/20 Furniture 800

Balance C/D 400

800 800
Balance B/D 400

DR COMPUTER ACCOUNT CR
Date Particulars £ Date Particulars £

03/01/20 Bank 1200 Balance C/D 1200

1,200 1,200
Balance B/D 1,200

DR BANK LOAN ACCOUNT CR

Date Particulars £ Date Particulars £

Balance C/D 10,000 04/01/20 Bank 10,000

10,000 10,000
Balance B/D 10,000
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PAUL RAMSEY LTD.

TRIAL BALANCE AS AT 31/09/2020

PARTICULARS DR CR
BANK A/C 18,300

CAPITAL A/C 9,900

FURNITURE A/C 800

OFFICE EQUIP LTD 400

COMPUTER A/C 1,200

BANK LOAN ACCOUNT 10,000

20,300 20,300
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Part III

Accounting Concepts

The Materiality Concept states that all accounting information, sizes, and transaction

nature should influence users' decisions. The realization concept states that all accounting

transactions should only be recorded when the actual receipt is recognized and not upon release

of sales. Therefore, accountants should identify sales from actual payments when recording

transactions into books of accounts (McLeod, 2020). The Going Concern concept states that all

business operations are expected to continue into the foreseeable future. Therefore, all business

decisions should be futuristic. The business Entity concept assumes that a business is a separate

legal entity distinct from its owners. Therefore, all business transactions should be recorded

separately from those of the owners or managers.

Also, the duality concept is an accounting concept that emphasizes the essence of

double entries in all transactions. This is because each business transaction has a double effect on

the business such that it reduces one account and increases another account in the same

magnitude (McLeod, 2020). The consistency concept states that all financial books of account

should be presented similarly and uniformly from one year to another. For instance, there should

be no changes in the representation of transactions unless the business shifts its business way.

The historical cost concept states that all business assets should be reported at their original

purchase cost during acquisition, even if it appreciates or depreciates (Pokale, 2020). The

accruals or the matching concept states that revenues and expenses are only recognized when

earned or incurred. Therefore, accountants should offset all revenues from the revenues they

assisted in generating at the end of each financial period.

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The money measurement concept states that accountants should only record

transactions expressed in monetary terms (Pokale, 2020). All business transactions should be

measurable in terms of money. For example, if a business has received a well-wisher's tank

donation, it should record the tank (asset) in terms of its monetary value. The Prudence concept

requires that a business not overstate revenues to realize or underestimate its costs (Pokale,

2020). Besides, assets should not be overvalued or undervalued to maintain a balance of

accounts.

Accounting Principles

The relevance principle states that accounting information should be relevant to

business operations and should be verifiable, neutral, and actual data from genuine transactions

(Pokale, 2020). The reliability principle states that accounting information should be consistent

regardless of the method used in computing such information. For instance, different techniques

can be applied, but the outcome should be the same. Comparability argues that accounting

information should be comparable with information from other organizations or with the same

organization at varying accounting periods.

Accounting Standards

IAS 1 governs financial reporting in financial statements because it outlines the purpose

of financial statements to relay important business information such as the business's financial

performance, trends, and financial position (McLeod, 2020). This information should be precise

and well classified into assets, liabilities, costs, revenues, owners' capital, and equity. IAS 2, on

the other hand, provides a prescribed technique for treating inventories. Inventories are measured
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at the lower costs and the estimated selling price less estimated costs. IAS 8 relates accounting

policies and principles such that accounting standards should comply with the relevant IFSR

when handling a business transaction and condition (Pokale, 2020). All accounting changes,

including estimates and errors, should be effected appropriately. IAS 10 argues the relevance of

financial adjustments after the financial reporting period and how these adjustments should be

made in the relevant books. For example, shares, stocks, and debentures to the shareholders and

prospective investors are conducted after the financial reporting period and must be adjusted

appropriately.

Besides, IAS 16 outlines the treatment of property, plant, and equipment. These business

assets must be determinably recognized and valued based on the initial cost. The valued or

devalued cost after depreciation expenses is offset from the cost of the asset (Needles et al.,

2013). Some assets appreciate rather than depreciate, such as land. These assets should be

recorded at their current values based on a particular asset appreciation rate. IAS 38 provides

recognition and realization of intangible assets. These are assets that are unseen or untouchable

by businesses but have significant value to the daily business transactions (Needles et al., 2013).

These assets arise from contractual or legal rights. IFSR 13 regarding fair value measurement

encompassing consistency and comparability in disclosing assets' fair value (Needles et al.,

2013). To determine the value of these assets, the market-to-market value is applied.
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Preparation of Final Accounts.

ITEM DR £ CR £ SoCI/SoFP
Premises 158,000 SoFP
Purchases 148,090 SoCI
Revenue 26,135 SoCI
Opening Inventory 17,035 SoCI
Business Rates 15,870 SoCI
Salaries and wages 36,685 SoCI
Accounts Receivables 6,805 SoFP
Accounts payable 6,915 SoFP
Telephone 810 SoCI
Motor expenses 9,505 SoCI
Bank account 15,490 SoFP
Bank loan 210,000 SoFP
Advertising 2,530 SoCI
Administration expenses 6,750 SoCI
Motor vehicles 45,700 SoFP
Fixtures 8,880 SoFP
Capital (01/07/2017) 50,100 SoFP
Capital introduced 2,000 SoFP
Drawing 34,000 SoFP
505,150 505,150

Part IV

Section A: Nick Sole Trader

NICK'S LIGHTING WAREHOUSE
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30TH JUNE 2018
£ £
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Revenue 236,135
Opening stock 17,035
Add: purchases 148,090
Goods available for sale 165,125
Less: closing stock (21,200) 143,925
Gross profit 380,060
Less: Expenses
Business rates 15,870
Salaries and wages 35,685
Telephone 810
Motor expenses 9,505
Advertising 2,530
Administration expenses 6,750
Total expenses (71,150)

Net profit 308,910

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NICK'S LIGHTING WAREHOUSE

STATEMENT OF FINANCIAL POSITION
AS AT 30TH JUNE 2018
Cost £ £
Accumulated Dep. NBV
Non-current Assets
Premises 158,000 000 158,000
Motor vehicles 45,700 000 45,700
Fixtures 8,880 000 8,880
Total Non-current assets 212,580
Current Assets
Closing Inventory 21,200
Accounts receivables 6,805
Total current assets 28,005
Current liabilities
Bank account 15,490
Accounts payable 6,915
Net current assets (22,405) 5,600
Total Assets 218,180

Financed by
Non-current liabilities
Bank loans 210,000
Capital
Capital b/d 50,100
Capital introduced 2,000
Less: drawings (34,000)
228,100
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Section B: Omar & Angel LLP

Adjustments

Wages and salaries (900+15100) = 16,000

Depreciation: Property = 1000

Fixtures & Fittings = 0.1×10,000 = 1000

Provisions for Depreciation: Property = (4500-1000) = 2500

Fixtures and Fittings = (4000-1000) = 3000

Drawings: Angela = (200+22300) = 22,500

Omar = (250 + 17000) = 17,250

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OMAR & ANGELA LLP

STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 31ST DECEMBER, 2020

£ £
Revenue Sales 120,000
Opening stock 12,500
Add: purchases 40,000
Goods available for sale 52,500
Less: closing stock (15,000) 37,500
Gross profit 157,500
Add: incomes
Trade receivables 1,500
Interests: Omar 3,000
: Angela 1,750 6,250
Less: Expenses
Depreciation expense
Fix & Fit. 1,000
Property 1,000
Trade payables 4,500
Loan interest 125
Partnership salary 5,000
Wages & salaries 16,000
Total expenses (27,625)
Net profit 136,125
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OMAR & ANGELA LLP

STATEMENT OF FINANCIAL POSITION
AS AT 31ST DECEMBER, 2020
Cost £ £
Accumulated Dep. NBV
Non-current Assets
Property 90,000 1,000 89,000
Fixtures & Fittings 10,000 1,000 9,000
Total Non-current assets 98,000
Current Assets
Closing Inventory 15,000
Provision for depreciation
Fixt. & Fitt. 3,000
Property 2,000
Prepayments 300
Current A/C: Omar 1,500
Angela 500
Total current assets 22,300
Current liabilities
Bank loans 30,000
Bank overdraft 3,500
Bad debts 375 (33,875)
Net current assets (11,575)
Total Assets 86,425
Financed by
Capital: Omar 30,000
Angela 17,500 (47,500)
Add: Net Profit 136,125
Less: drawings: Omar 17,250
Angela 22,500 (39,750)
86,425
Section C: Alenia Plc.
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Adjustments

Closing inventory: 1600

Transfers to the general reserve: 1,400

Corporate tax: 2,000

Ordinary Dividends: 8,000 and Preference dividends = 0.5× 100 = 50

ALENIA PLC.

STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 31ST DECEMBER, 2020

£ £
Revenues 43,065

Add: purchases 19,045

Opening inventory 3,515
Less: closing inventory (1,600) 20,960
Goods available for sale 64,025
Gross profit
Add: Incomes
Accounts receivables 3,025
Less: Expenses
Business rates 2,815
Salaries and wages 2,500
Motor expenses 4,752
Administration expenses 3,375
(13,442)
Net profit before tax 53,608
Less: corporation tax (2,000)
Net profit after tax 51,608

ALENIA PLC.
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STATEMENT OF FINANCIAL POSITION

AS AT 31ST DECEMBER, 2020
Cost £ £
Accumulated Dep. NBV
Non-current Assets
Premises 34,000 34,000
Fixtures 1,400 1,400
Motor vehicles 2,450 2,450
Total non-current assets 36,850
Current Assets
Closing inventory 1,600
Account receivables 3,025
Share premium 75
Total current assets 4,700
Less: current liabilities
Bank overdraft 4,240
Accounts payable 5,197
Total current liabilities (9, 437)
Net current assets (4,737)
Total Assets 31,150

Financed by;
Net profit 51,608
Long-term liabilities (23,500)
Bank loan
Add: Issued share capital 50
Preference 9,000
Ordinary 8,050
Total shares issued (1,400)
Less: reserve transfers 31,150
References
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McLeod, C. (2020). Financial Reporting Principles and Accounting Concepts: A Collection of

Case Studies. https://egrove.olemiss.edu/cgi/viewcontent.cgi?

article=2277&context=hon_thesis

Needles, B. E., Powers, M., & Crosson, S. V. (2013). Principles of accounting. Cengage

Learning. https://airbooks.org/sample/Accounting/AC1-100/AC057/sample%EF%BC

%8DPrinciples%20of%20Accounting%2012th%2012E%20Belverd%20Needles.pdf

Pokale, V. (2020). Accounting Standards and Financial Reporting.

http://studymaterial.unipune.ac.in:8080/jspui/bitstream/123456789/7327/1/ACCOUNTIN

G%20STANDARDS%20AND%20FINANCIAL%20REPORTING.pdf