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Question :
This assessment will provide certain questions which are like:
- What are the differences between financial position statement and income statement.
- What are the methods for reconciliation of suspense and control accounts.
Answer :
INTRODUCTION
Financial Accounting is a branch which is used to put a complete track about the transactions of a company. Under this, proper guidelines and procedures are used to prepare the final accounts of the organization. The transactions are recorded in a perfect sequence so that companies can know that what are the expenses, income and position of the company at the end of the year. The main aim of financial accounting is to summarize everything related to financial transactions going in the business so that it can be useful for taking important decision by all the stakeholders. Financial statements have to be compulsorily disclosed by the companies whose stocks are listed on stock exchange (ScottO'Brien, 2013). In this report, income statement and balance sheet will be prepared for both sole proprietorship and limited company and then a glimpse on the differences between both income statement and balance sheet will be discussed. The report will also include an example of bank reconciliation and the reconciliation of control and suspense accounts.
FINAL ACCOUNTS OF GREG PALMER
|
Statement of P&L A/c of Greg Palmer |
||||
|
Dr. |
 |
 |
Cr. |
 |
|
Particulars |
Amount (£) |
Particulars |
Amount (£) |
 |
|
To Opening Stock |
190000 |
By Sales |
1301500 |
 |
|
To Purchases |
960000 |
By Closing Stock |
120000 |
 |
|
To Wages |
330000 |
By Gross Loss |
58500 |
 |
|
 |
 |
 |
 |
 |
|
 |
1480000 |
 |
1480000 |
 |
|
 |
 |
 |
 |
 |
|
 |
 |
 |
 |
 |
|
To Gross Loss |
58500 |
By Net Loss |
388000 |
 |
|
To Outstanding Wages |
30000 |
 |
 |
 |
|
To Sundry Expenses |
165000 |
 |
 |
 |
|
Prepaid rent |
-35000 |
 |
 |
 |
|
Outstanding Gas Payment |
7500 |
 |
 |
 |
|
To Heat & Light |
92000 |
 |
 |
 |
|
To Depreciation: Furniture & Fittings -Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â |
70000 |
 |
 |
 |
|
 |
 |
 |
 |
 |
|
 |
388000 |
 |
388000 |
 |
|
 |
 |
 |
 |
 |
|
 |
 |
 |
 |
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|
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|
 Balance Sheet for Greg Palmer as on.. |
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|
Liabilities |
Amount (£) |
Assets |
 |
Amount (£) |
|
 |
 |
 |
 |
 |
|
Capital |
960500 |
Account Receivables |
 |
120000 |
|
Net Loss |
-388000 |
Prepaid Rent |
 |
35000 |
|
Drawings |
-105000 |
Closing Stock |
 |
120000 |
|
Bank Overdraft |
50000 |
Fixtures and fittings |
350000 |
 |
|
Outstanding Gas Payment |
7500 |
- Depreciation |
-70000 |
280000 |
|
Outstanding Wages |
30000 |
 |
 |
 |
|
 |
 |
 |
 |
|
|
 |
555000 |
 |
 |
555000 |
FINAL ACCOUNTS OF KENNY PATON LTD.
|
Statement of P&L A/c of Kenny Paton Ltd. |
||||
|
Dr. |
 |
 |
Cr. |
 |
|
Particulars |
Amount (£) |
Particulars |
Amount (£) |
 |
|
To Opening Stock |
86000 |
By Sales |
2068000 |
 |
|
To Purchases |
1054000 |
By Closing Stock |
78000 |
 |
|
To Gross Profit |
1006000 |
 |
 |
 |
|
 |
 |
 |
 |
 |
|
 |
2146000 |
 |
2146000 |
 |
|
 |
 |
 |
 |
 |
|
 |
 |
 |
 |
 |
|
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 |
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|
To Distribution Costs |
367000 |
By Gross Profit |
1006000 |
 |
|
To Administration Costs |
287000 |
 |
 |
 |
|
To Outstanding Interest |
14274 |
 |
 |
 |
|
To Outstanding Dividend |
152000 |
 |
 |
 |
|
To Depreciation: |
 |
 |
 |
 |
|
On Plant & Machinery |
119700 |
 |
 |
 |
|
On Office Equipment |
26400 |
 |
 |
 |
|
To Outstanding Corporation Tax |
30000 |
 |
 |
 |
|
To Net Profit |
9626 |
 |
 |
 |
|
 |
1006000 |
 |
1006000 |
 |
|
 |
 |
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|
Balance Sheet for Kenny Paton as on.. |
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|
Liabilities |
Amount (£) |
Assets |
 |
Amount (£) |
|
 |
 |
 |
 |
 |
|
£1 ordinary shares fully paid |
1520000 |
Account Receivables |
 |
619000 |
|
Net Profit |
9626 |
Bank |
 |
45000 |
|
Dividend declared |
152000 |
Closing Stock |
 |
78000 |
|
Bank Loan |
549000 |
Premises |
 |
1345000 |
|
Outstanding Interest |
14274 |
Plant & Equipment |
798000 |
 |
|
Trade Payables |
640000 |
- Depreciation |
119700 |
678300 |
|
Outstanding Corporation Tax |
30000 |
Office Equipment |
176000 |
 |
|
 |
 |
-Depreciation |
26400 |
149600 |
|
 |
2914900 |
 |
 |
2914900 |
 DIFFERENCES BETWEEN AN INCOME STATEMENT AND STATEMENT OF FINANCIAL POSITION
|
Basis |
Income Statement |
Balance Sheet |
|
Meaning |
It is also called profit and loss account and it include all the expenses and revenues that are indirect in nature for that particular period. |
This is the final statement prepared which includes liabilities or capital and assets of the organization to reveal the position at the end of the financial year. |
|
Motive of Preparation |
This account is made to find out the net loss or net profit of the company which has occurred during the period (Edwards, 2013). |
This statement is made to reveal the true position of the organization and to find out that actually where the business is standing. |
|
Kind of Accounts Incorporated |
It only consist single account i.e. Nominal |
It has two kinds of accounts included i.e. Personal and Real |
|
Order and dependency |
It is made before the balance sheet and hence it is not independent of balance sheet. |
It is made after the profit and loss account is made and hence it is dependent on income statement as the figures of net loss or net profit is taken from there (Warren and Jones, 2018). |
|
Balance |
If there is a balance amount on debit side, then it is Net Loss and if there is a balance on credit side, then it is Net Profit. |
Both liabilities and assets side should come equal as it shows the accuracy of the final |
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