Recording transaction using journal and ledges

"T" account ...7 Task 2: Produce a trial balance applying the use of the balance off rule to complete the ledger14 Task 3: Prepare final accounts from given trial balance figures adjusti

ABSTRACT 2

INTRODUCTION 3

Task 1: Recording transaction using journal and ledges .4

I What is financial accounting? .4

II What is the Accounting Cycle? .4

III Journal entry of AC&DC .5

IV "T" account .7

Task 2: Produce a trial balance applying the use of the balance off rule to complete the ledger14 Task 3: Prepare final accounts from given trial balance figures adjusting for accruals, d epreciation, and prepayments 15

I Depreciation .15

1 Definition .15

2 Calculate depreciation straight-line method by using life of assets and rate .15

II Prepayment .16

1 Definition .16

2 Calculate prepayment .16

III Accruals .17

1 Definition .17

2 Calculate Accrual .17

Task 4: Produce final accounts for a range of examples that include sole traders, p artnerships, or limited companies .19

I Final Account .19

II Adjustment .19

III Final Account with adjustment and calculation .19

CONCLUSION 23

REFERENCES 24

Financial accounting is essential for financial accountability, necessary for a prosperous society.This report argues the importance of research that may provide more complete insights intofinancial accounting This article examines an innovative assessment task on college accountingstudents in an economic accounting course The mission requires students to research to identifycurrent shifts and debates in the financial accounting field by tracking multiple sources and using

a newsletter format to present their findings This mission, designed to increase studentengagement and interest in accounting matters and accounting presentation as a dynamic,interactive social structure, is not the case Educators use legal practice and can in a wide variety

of geographic disciplines and contexts Furthermore, it shows the importance of creativity as aneffective tool for increasing student engagement and the advantages of this assessment task on

the job.

Keyword: Accounting, Financial, Balance, Journal entry, Expense, T account, Accrual,

Prepayment, Calculate, Account receivable

I'm in a role of an assistant accountant preparing an accounting for AC & DC In this report, thereporter will display the definition of the accounting cycle, the test balance, the final Account,and so on The reporter will then show T account calculation, test balance, prepayment, etc., by

AC & DC The following report contains information about the definition of financialaccounting, what is the accounting cycle, and how to apply it, with examples Track informationabout depreciation, accrual, prepayment, and how it is calculated The final part of the reportcovers the preparation of a definitive account with adjustments

Task 1: Recording transaction using journal and ledges

I What is financial accounting?

Financial accounting is an accounting discipline that focuses on drafting annual reports forshareholders on the company's overall operating results

In accounting and financial accounting operations, it is the recording, reflecting, synthesizingdata, preparing financial statements to serve the information needs of the subjects outside theunit, the leading enterprise The outside companies that need this information often includeshareholders, authorities such as tax, inspector , creditors, banks and mainly serve theneeds of macro-management

This is the way of classifying accounting according to the content, nature, and purpose ofproviding information to meet the needs of accounting objects in the accounting profession

II What is the Accounting Cycle?

The accounting cycle is a collective process of identifying, analyzing, and recording theaccounting events of a company The series of steps begin when a transaction occurs and endwith its inclusion in the financial statements Additional accounting records used during theaccounting cycle include the general ledger and trial balance (Investopedia)

Steps of the Accounting Cycle

There are Five steps to the accounting cycle:

1 Source Documents: are documents, such as cash slips, invoices, etc that form the source

of, and serve as proof for, a transaction In other words, they are the first documents thatexist relating to a transaction Bookkeepers and accountants need to keep sourcedocuments for each transaction

2 Journals: Journal entries are that first basic entry of debit and credit for each transaction,

chronological (date-order) records of transactions entered into by a business

3 Ledger (T-Accounts): The ledger is a grouping of the accounts of a business The

accounts are in the shape of a "T" and thus are often referred to as T-accounts In this step

we take all the journal entries (debits and credits) relating to one account (in thisexample, bank) and draw up an account with all the transactions relating to it

4 The Trial Balance: The trial balance is a sheet or report displaying all the accounts of a

business, drawn up as a trial (test) of whether the total of all the debit balances equal thetotal of all the credit balances

5 Financial Statements: The purpose of the financial statements is to show the reader the

financial position, financial performance, and cash flows of a business

6 Journal entry is an accounting transaction, usually involves a financial accounting

document such as an invoice, payment, a receipt, etc An entry always includes at leasttwo accounts, described here as credits or debit to specific statements In a journal, thesum of the debit amounts must be equal to the credit sum

Example: Materials account Dr 300£

Ledger (T Account) is an essential thing in every Business The accountant will clearly and

completely record the entire transaction process, such as revenues, expenditures, and debts ofthe company with customers and partners from time to time, from time to time, each stage.Example: If AC&DC sold £20,000 worth of materials, it would debit its cash account

£20,000 and credit its materials or inventory account £20,000 This double-entry systemshows that the company now has £20,000 more in cash and a corresponding $20,000 less ininventory on its Materials The T-account will look like this:

Assets

Trial balance: The trial balance sheet is an accounting spreadsheet in which the proportions

of all ledgers are made into two columns of Debit and Credit are equal

Within an appropriate period, the parties of each Account will be aggregated and balancescalculated These balances are often grouped on a trial balance sheet, which serves as a basisfor reporting and balance sheet operations

Use the trial balance test to detect any computational errors that have occurred in the entry accounting system If the total debt is equal to the full credit, the trial balance sheet isconsidered balanced, and there will be no math errors in the ledger However, this does notmean that there are entirely no errors in the company's accounting system

double-III Journal entry of AC&DC

Number Account title and explanation Ref Debit £ Credit £

Account payable

Bought raw material

2

Account receivableReceived income on Account

Borrowed money from bank

4.000

4.000

4

CashShare capital

Issued share to investor

2.000

2.000

5

Insurance expenses Cash

receivable

10.00010.000

20.000

7

Tax expense Cash

Paid income tax to government

500

500

8

Salary expense Cash

Paid salary to employees

3.000

3.000

9

Insurance expense Cash

Paid as insurance expense.

1.000

1.000

10

Dividend expense Cash

Paid dividend to shareholder

10% interest paid to bank

13

Cash Dividend

Dividend received from company B

300

300

14

CashAccount receivable Revenue account

Value product sold to customer on 70%

credit and 30% cash

9002.100

3.000

15

Account payable Cash

Returned to bank £4.000 borrowed money

4.000

4.000

16

Sale of machinery Cash

Machinery sold and got income loss

300

300

17

Cash account Discount paid Revenue account

20% Discount paid to customer on the cash sales of £1000 product

800200

Bad depts recovered Account

Bad debts recovered amount of £10,000

Shared capital

account

Value product sold to

£20,000 from Account receivable, dividend received from Company B, receive 30% cash in

£3,000 value product sold to customer, 20% Discount paid to customer on the cash sales of

£1000 product, product sold to customer amount of £800

Cash on credit: Paid insurance £65, paid income tax to government amount of £500, paid

salary to employees £3,000, £1,000 paid as insurance expense, dividend paid to shareholderamount of £200, 10% interest paid to bank on £20,000 borrowings, £4000 borrowed money,returned to ACB bank

£4,500

£4,500

(1): Bought raw material on credit from Mr X amount of £5,000 at 10% discount The

Business only paid £4,500

Discount received

Bought raw material (1)

£500

£500

(1): Bought raw material on credit from Mr X amount of £5,000 at 10% discount Because

of 10% discount, the company is saved £500

Therefore, the Business was paid £2,100 on 70% credit

Product sold

£3000 value (14)

£3,000

Sale £1000 product (17)

(17) Sold product with £1000 to customer

(19) Cash sold product sold by customer amount of £800

£4,000

(3) Borrow money from ACB bank £4,000

(15) Returned £4,000 to ACB bank

Shared capital

Issued share to investor (4)

£2,000

£2,000(4) Issued share to investor amount of £$2,000

(7): Paid income tax to government amount of £500.

(8): Paid salary to employees £3,000

(9): £1,000 paid as insurance expense

(11): Depreciation on machinery 10% of £10,000, therefore, depreciation only lost £1,000 (12): 10% interest paid to the bank on £20,000 borrowings, meaning The Business have to pay

Machine account

Depreciation on

£1,000

machinery

(11) Machinery sold (16)

£300

£1,300(11): Depreciation on machinery 10% of £10,000 said the value of the machine is reduced

£1,000 (16): Machinery sold and got £300 loss

Loss on sales machine

Machinery

sold (16)

£300

£300(16): Machinery sold and got £300 loss

Outstanding rent (18)

£55

Outstanding rent expense

(18): Outstanding rent expense £55

Bad debts recovered Account

Bad debts recovered (20)

£10,000

£10,000(20): Bad debts recovered amount of £10,000

Dividend income

Dividend received from Company

B (13)

£300

£300(13): Dividend received from Company B, £300

Task 2: Produce a trial balance applying the use of the balance off rule to complete the ledger.

Account

Task 3: Prepare final accounts from given trial balance figures adjusting for accruals, depreciation, and prepayments.

I Depreciation

1 Definition

Depreciation is the method of distributing the cost of a fixed asset over its useful life Fixedassets or tangible fixed assets are physical assets that can be touched Some examples oftangible fixed assets that are often depreciated are Houses, Equipment, Office Furniture,Vehicles, Land, Machinery

For example: If a building is purchased from a company at the cost of $ 1,000,000 and anexpected truck life of 5 years, the Business can depreciate the property at a depreciation cost

of $ 200,000 per year over time five years

2 Calculate depreciation straight-line method by using life of assets and rate

We have the formula: ������������= Book value−Residual value

Number of useful life

We also have the formula: ���� �������� ���� = ������ ������������ �� ����.x100

Book value−Residual value 4,000

(2): AC & DC expects the machine to have a salvage value of £ 2,000 when its 4-year life

expires But from 2014 to 2016 = £2,250 => 2017 is £250

Some examples include Expenses for buying insurance, paying rent in advance, rentingproperty and services Costs for establishing a business, moving business locations, andreorganizing companies Training costs for managers and technical workers Research costsare of great value; the cost of implementation does not qualify as intangible fixed assets(fixed assets)—the cost of buying the technical documents during the downtime.

2 Calculate prepayment

The firm pays an insurance premium of £5 000 to cover April 1, 2020, to March 31, 2021,but the firms' accounting year ended on December 31, 2020 Therefore, January to March isprepaid for the year 2021

Because of paying £5 000 to cover 12 months

So, we have 1 month = £5,000/12 =£1,250/3

 3 months the firm pays on prepayment is (£1,250/3) x3 = £1,250

Prepaid insurance expense account Cr: £1,250

Prepayment account Insurance £1,250

£1,250

Insurance expense account

Prepaid insurance expense

1 Definition

The accounting and bookkeeping term accruals refer to adjustments that must be made before

a company's financial statements are issued (accountingcoach) Accruals involve thefollowing types of business transactions:

 Expenses, losses, and liabilities that have been incurred but are not yet recorded in theaccounts, and

 Revenues and assets that have been earned but are not yet recorded in the accountsFor example, in December the company used electricity in December However, the utilitydid not bill its customers for that electricity until they read the meter in January Therefore,the utility's financial statements will need accrual adjustment

2 Calculate Accrual

Commissions receivable for each quarter of 2014 are as follows: £ 3 000 for the first quarter;

£ 3,300 for the second quarter; £ 2,600 for the third quarter; and £ 3,700 for the fourthquarter But commission revenue for the fourth quarter, £ 3,700, has yet to be received byDecember 31, 2020 For these reasons, cumulative revenue is £ 3,700

Account receives commission accrual revenue

Commission £3,700

£3,700

Commission receives commission accrual revenue

Account receives commission

£3,700

£3,700

Task 4: Produce final accounts for a range of examples that include sole traders,

partnerships, or limited companies

I Final Account

Final Accounts gives an idea about a business's profitability and financial position to itsmanagement, owners, and other interested parties It combines the following statement:trading account, profit and loss Account, and balance sheet

The final accounts are prepared to throw light on the Business's financial results during theaccounting period and the Business's financial position at that period (Kaur, 2018)

II Adjustment

An adjusting entry is simply an adjustment to your books to make your financial statementsmore accurately reflect your income and expenses, usually — but not always — on anaccrual basis Adjusting entries are made at the end of the accounting period This can be atthe end of the month or the end of the year (nerdwallet)

III Final Account with adjustment and calculation

Revenue

(COGS)

£71,286 (£60,486)

Gross profit

(Operation expense)

£10,800 (£7,712)

CoGS = Opening stock + purchase + carrier inward – closing stock

= 8,760 + 60,426 + 1,500 – 10,200 = £60,486

Gross profit = Sales – CoGS =£71,286 - £60,486 = £10,800

Net income = Gross profit - Net income = 10,800 - 7,712 = £3,088

In apprentice premium £120 are unearned so £750 – £120 = £630

Total revenue = Sales + Discount + Discount receivable + Apprentice premium

= 70,176 + 360 + 120 + 630 = £71,286

Cost of goods sold