Financial Accounting (Research Paper Sample)

1138555197497 ISTEC Business School Bachelor of Business Administration (BBA) Assignment Cover Page Course Name: Financial Accounting Course Code: AP I Submitted By: Gerges Atef Monir Helim Attia Student ID: IBSBBAIMUAE25120185 Semester: Submitted To: Lecturer’s Name: Sean kemp Date of Submission: 06/02/2026 Declaration I hereby declare that this assignment is my original work and has not been copied or reproduced from any other source without proper citation. Student Name: Gerges Atef Monir Helim Attia Signature: Date: 06/02/2026 Question 1 Definition and assessment of financial accounting Financial accounting refers to the process of recording and summarizing financial information to the external parties in order to understand the true position of an organization (Schroeder et al., 2022). These financial records include the balance sheet, the income statement, the cashflow statement and also the statement of changes in equity. Well-structured financial records assist in decision making and recording tracking to both the management and external entities (Tettamanzi et al.,2022). For these accounting records to be varied, they must be prepared in consideration of global accounting standards in the likes of Generally Accepted Accounting Standard (GAAP). Financial Accounting assist third parties such as creditors, potential investors as well as government bodies such as the tax agencies to know the profitability as well as risks associated with the business. At the same time people lending out their money to the business are able to know whether their money will be recovered back. Although financial accounting plays an important role in describing how business has performed, it majorly depends on what has occurred in the past, in most instances the records are for what has already happened. This create a major challenge while trying to address future plans and other development agendas of the business. To the larger extent financial accounting records are mostly prepared by the management, this might create room for bias thus giving misleading information to the external parties (Schroeder et al.,2022). While preparing and presenting financial records, accuracy remains to be very important, this is because figures presented should show the exact position of the business. If for instance erroneous figures are presented, they may not give a true picture of how the business is performing. In accurate figures may subject the business to losses. Government agencies may tax the business higher amounts if higher figures are reported in revenues. This shows that accuracy is very important when preparing and presenting financial information. Question 2 Purpose of Double entry in accounting. As per the Accounting equation Assets=Capital +Liabilities, any transaction that occurs has to affect two accounts in which there should be an equal debit entry and an equal credit entry in the general ledger. This helps in a strong way to reduce errors that may arise while posting transactions (Sangster, A. 2025). If the two sides do not balance, it shows that transactions were not well recorded. Double entry boost accuracy in businesses as it assists in detection of errors that may have occurred while posting transactions in the business general ledger. When posting these entries in other financial statements, such as the trial balance, it makes work easier to detect errors that may have occurred. If debit side of the trial balance is not equal to the credit side, then the management can easily note that an error occurred. Double entry concept cultivates reliability as it helps to trace movement of various business transactions. Through this any omissions that could have occurred is easily noted. When auditors want to carryout checks, they can follow along the double entry system in the general ledger (Sangster, A.2025). Question 2b By introduction of 10,000 capital to the business, there is an increase of 10,000 in the cash account, increase in cash which is an asset is debited, simultaneously an increase in the owner’s equity of 10,000 is credited. (Debit Cash,10,000: Credit Capital,10,000). When a sale of 2,000 is executed, the two accounts that will be affected are cash and sales revenue account. In the cash account there is an increase of 2,000 which will be debited, at the same there is an increase in sales revenue by 2,000 which will be credited. (Debit Cash,2,000: Credit Sales revenue,2.000) A credit purchase of 1,000 has these two effects, one there an increase in purchases, hence a debit entry. Simultaneously there is an increase in payables, which is a liability hence a credit entry. (Debit Purchases,1,000: Credit Payables,1,000) Question 3 Ethical roles in Accounting Ethics refers to the accepted code of conduct in any community or society. If ethics are ignored, severe repercussions are experienced, in any business environment the role of accountants and auditors play a major role in the financial health of the business when reporting statements to external entities and to the business itself (Poje & Zaman,2022). Enron corporation collapsed from the failure of its accountants by allowing the management to give false value of the company’s debt, they oversaw the management subsequently overstate profits hence giving a false presentation of the company financial position, they subjected the company to collapse for their own personal gain. Had they observed their ethical duties they could have stopped the management from manipulating statements. External auditors did not maintain their professional ethics as they could have given an independent oversight of Enron books of accounts. On the contrary they received higher audit fees thus compromising on their true overview of the company. Had these two parties observed professional ethics in their work, Enron corporation could not have collapsed. In auditing ethics, auditors are expected to remain neutral and give a true and impartial information from their observations and conclusions. b. Responsibility of accountants and auditors in public interest Both accountants and auditors carry an obligation from the public and external entities to give what is true and rightful information (Poje & Zaman, 2022). Accountants prepare financial statements that are highly relied upon by the public, if this information is biased and not correct, the entire public would be misled. Accountants from Enron corporation could have firmly stopped the management from exaggerating profits and reveal the existing debt. From this they failed their public duty to present what is truthfully right. Auditors are expected by the public to give a true and fair view of their findings. This was contrary to these auditors as they received high audit fees and presented falsefully information. While performing their duties, the public expects auditors to check for any errors or any information that may be distorted. Both accountants and auditors are governed by rules laid down by the respective bodies, there are professional bodies that regulate how these professionals carry out their duties. For public interest these professionals are supposed to be impartial and neutral, failures to this, the confidence bestowed to them by the general public is disguised (Poje & Zaman, 2022). Lessons for modern day Accounting Enron corporation brought about great teachings to the modern world in respect to how professional ethics should be observed in day to day running of business entities. Its beyond reasonable doubts that professional independence remains crucial to both accountants and auditors while executing their duties. The Sarbanes-Oxley act (SOX) of 2002 enacted in the united states of America obliged management to verify information internally before it is released to the general public (Su et al.,2022). SOX act also has played a major role in re- shaping modern day auditors ethics for it prohibits auditors from engaging in services that are not within their professional mandate. Through this the auditors give a fair view of their findings with no bias or any conflict of interest. Enron corporation has in a strong way demonstrated how lack of ethical values in an organization contributes to its collapse. It turns out to be a good lesson to the modern accounting fraternity that un- ethical practices lead to business failures and collapse. Modern accountants have learned the aspects of whistle blowing, this could have greatly saved Enron corporation when the management interfered with the company books. Question 4 Uses of balance sheet and cashflow statement. For any business entity to have a smooth running, financial statements have to be prepared (Olayinka, 2022). They present an overview of how the business is performing. They give the financial position of the business entity to both the management and external parties. Balance sheet. This is a financial statement that gives the exact financial position of a business entity over a given period of time. It comprises of Assets: These are commodities that the business entity owns, they can be grouped in to two groups, Non-current assets and Current assets. Non-current assets are resources that were acquired by the business not to be sold. They have long term benefits. They include, land and buildings, motor vehicle, fittings and fixtures owned by the business. Current assets are short term and change within a period of twelve months. They include cash, receivables, debtors and stock. Liabilities: This is what the business owes to the external entities. They can be grouped to either long term or short-term liabilities. Long term liabilities have a longer payment period exceeding one year while short term liabilities are paid within one year. Equity: This refers to the owner’s contribution towards the business. Users of Balance sheet Information contained in the balance sheet reflects the financial position of the business...