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Financial Accounting.

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Introduction

Financial Accounting Task 1 The purpose of a business keeping accounts is to record the financial transactions because the business needs to quantify items such as sales, expenses and profit. They then need to present the figures in a meaningful way to check the success of the business. How the accounting system works First of all the accountant collects all the prime documents together such as invoices, credit notes, bank paying in slips, cheques, BACS. Once the accountant has gathered all the sources they summarise the information into daybooks, journals and cashbooks. The accountant then has to make double entries for each transaction in the above books. Double entries must be made in the sales ledger, purchase ledger, nominal ledger (which are used for petty cash and bank and cash transactions). From these double entries a trial balance is compiled which checks all the figures and calculations. ...read more.

Middle

Business Documents Different business documents are used throughout accounting and each has its own relevance and importance. The invoice is what is received when a good or service is bought, on the invoice it should state the amount owing to the company the service or good was bought from, when the amount should be paid and the details of the good or service which has been provided. Invoices are prepared for two types of sales: Cash sales- where payment is immediate, whether it is cash, cheque, debit card or credit card. Credit sales- this is when payment is to be made at a later date usually within 30 days. As well as credit sales there are credit purchase when your company buys something on credit you become a creditor. Also the customers buying on credit from you become debtors. Credit notes- these are sent out to customers when they have bought from the company. ...read more.

Conclusion

Purchases returns day book- this is a list of all goods, which the company has returned to the suppliers, and this list is compiled from all the credit notes, which have been received from suppliers. Accounting concepts There are a number of basic concepts which when preparing accounts are followed: Business entity - this refers to the fact that assets and liabilities of which plays a part in owning or running the business are not include with the owner's personal assets and liabilities. The only links between the owner's personal funds and the business are capital and drawings. Money measurement- this means that all items is expressed in the common denominator of money. That is the only way items can be added together to achieve a net profit or balance sheet total. The only disadvantage is that certain items such as an efficient management and good labour force cannot be expressed in money terms. Historical cost concept- ...read more.

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