Recording Business Transactions: Journal Entries and Analysis

This assignment provides a comprehensive overview of accounting principles and practices. It begins by explaining the importance of accounting in recording, summarizing, and analyzing financial transactions for internal and external users, highlighting the advantages and disadvantages of maintaining accounting records. The main body of the assignment includes journal entries for a business, ledger accounts, and a trial balance. It also presents an income statement for Airman Company, analyzing its financial performance and the impact of external factors such as the COVID-19 pandemic on sales, inventory, and expenses. The document covers various aspects of financial accounting, including the preparation of financial statements, the recording of transactions, and the analysis of business performance. The assignment concludes with a summary of the key concepts and their practical applications in business decision-making.

RECORDING BUSINESS
TRANSACTIONS

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
PART 1.......................................................................................................................................3
PART 2.......................................................................................................................................5
PART 3.......................................................................................................................................6
Part 4..........................................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
The file explains the meaning of accounting that accounting is all about recording
transactions, summarizing and analysing transaction and making decision on the basis of these
transactions. It explains that there are internal users like management, shareholder and external
users like government, customers etc. make the decisions that makes the decisions and there are
various advantages like availability of accurate data for audit, evaluation of position of the
company and disadvantages like estimated data etc.
The file also includes the financial information in journal form and it also shows the income
statement of Airman company and evaluate the reason of difference in profit of the company
from 2009.
MAIN BODY
PART 1
a) Users of accounting information for decision-making: - The accounting information can be
used by the company for facilitating smooth and efficient decision-making such that
organizational objectives can be achieved. The users of such information can be divided into two
parts namely the internal as well as the external users of the information. (Warren, Jonick, and
Schneider, 2020).
External users: - They are outside the organization.
1) Creditors and Lenders- They use accounting information in order to find out the
credibility of the company or the borrower, that will they be able to repay, assets and
liabilities, financial position, past performance etc. They get themselves assured before
lending money (Collier, 2015).
2) Investors- They are the users of accounting information as they need to find out whether
the capital they provide is safe or not. For such analysis the financial data needs to be
studied to gather information regarding the future probability and growth prospects of the
company.
3) Government Regulatory Bodies- The information proves to be essential for these
authorities as they get informed regarding economy and market conditions. They can
assess the amount of tax payable and also regulate that no illegal operations being carried
on by the company.

4) Lawmakers- They also play key role by staying updated with the accounting and
financial information to know the position of local economy and then bring changes in
the existing laws to compete globally (Russell, Milne, and Dey, 2017).
5) Customers- They acquire information from such accounts to know whether the products
that are sold by the company are of optimum quality and price or not.
6) Public- The public also has say in a company as they make sure that company does not
ruin the society. The company has certain corporate social responsibility that it has to
fulfil for the betterment of the society (Bagdasaryan, 2019). It is to be ensured that no
harmful effluents are disposed off, environmental protection, less pollution, sustainable
development, funds for development of society etc. The company can build good brand
image by observing such responsibilities.
Internal Users: - They are within the organization.
1) Shareholders- They are the internal parties which use this information to know whether
the management of the company is making apt use of their capital or not. What returns
have they generated in the year is the key idea they need to get.
2) Management- The information is used for smooth and efficient decision-making by using
various tools over the financial information as provided to the managers which is also
called management accounting. Certain decisions like make or buy, expansion or
downsize and the borrowing or investment has to be made to improve operational
efficiency of the business.
3) Employees- They use in assessing their work effectiveness as well as that of the
company. As their job security and well-being depends on the performance of the
company it is to be made sure that the company is moving in right direction and is able to
achieve its goals (B Romney,. 2018).
b) Advantages of recording accounting information: -
1) Helps in providing information regarding Financial performance of the company-
Keeping good accounting records by the accountant for the period in consideration helps
the users of such information informed about the financial well-being of the company. It
helps in determining the current profitability of the company and accordingly such
statements could be analysed to know the future growth prospects of the company.

2) Backup at the time of audit- At the time of audit the records are used as backups to
provide information regarding all the incomes and expenses incurred by the company.
The auditor shall examine such reports and then compare with the returns filed, if they
prove to be accurate, then in less time the audit shall conclude (Weigand, Blums, and de
Kruijff, 2020). Apart from this another issue is that if there is absence of such proofs, the
auditor shall verify based on best judgement as per industry norms.
Disadvantages of recording accounting information: -
1) Transactions are recorded in terms of money- Only financial transactions can be recorded
in the books of accounts and that to in money terms whose value keeps on changing. The
operations are quantified and the quality is unable to be recorded. Based on such numbers
various business decisions are taken which may not be sound. Also, the original cost of
fixed assets is only mentioned rather than the present value in the market.
2) The accounting records may involve biases- It can be said that personal biases of the
accountant of the company can be present in the records as they have the flexibility of
using different methods. The methods of inventory valuation, treatment of both revenue
and capital expenses and depreciation methods etc. Such disadvantage also deters the
company to compare itself with its competitors (Jensen and et.al., 2015).
PART 2
Journal Entries of David wise Business:
DATE Particulars L.F DEBIT CREDIT
02/01/20 Asma Ltd A/c Dr. 350
To Office Fixtures A/C 350
(being office fixtures returned to
supplier Asma Ltd)
02/04/20 Bad debt A/C dr. 85
To sockeyes A/C 85
(being bad debt written off)

02/09/20 Machinery A/C dr 2300
To bank A/C. 200
To TS co A/C 2100
(being part of machinery bought for cash
and other part bought for credit)
01/02/13 Bad Debt recovered A/C dr. 220
bad debt A/C Dr 50
To S. Hill A/C 270
(being bad debt written off and recovered
220 only)
01/02/20 Drawings A/C dr. 180
To purchase A/C 180
(Being goods taken for personal use by
proprietor)
01/02/26 Drawings A/C 85
to cash A/C 85
(being personal insurance premium paid
by proprietor)
01/02/28 T.S co A/C 1050
To Bank A/C 1050
(being half machinery debt paid by issuing
cheque)
PART 3
Pearce & Sons general ledger accounts for the month of February 20: -

Bank A/C
Particulars Amount Particulars Amount
To Capital 21500 By Cash 1500
To Cash 350 By Van 4800
By Nissan 5200
By Office 620
By balance c/d 9730
Van A/C
Particulars Amount Particulars Amount
To Capital 25000 By balance c/d 35000
To Bank 4800
To Nissan 5200
Lloyd's Bank A/C
Particulars Amount Particulars Amount
To balance c/d 2500 By Cash 2500
Office Fixtures A/C
Particulars Amount Particulars Amount
To Capital 800 By balance c/d 2590
To Quick Office 1100
To Cash 70
To Bank 620
Cash A/C
Particulars Amount Particulars Amount
To Lloyd's Bank 2500 By Office Fixtures 70

To Bank 1500 By Bank 350
By balance c/d 3580
Quick Office Ltd.
A/C
Particulars Amount Particulars Amount
To balance c/d 1100 By Office Fixtures 1100
Nissan Co. A/C
Particulars Amount Particulars Amount
To Bank 5200 By Van 5200
Capital A/C
Particulars Amount Particulars Amount
To balance c/d 47300 By Bank 21500
By Van 25000
By Office Fixtures 800
Trail Balance as at 30 February, 20: -
Trial Balance
S. No Particulars Dr. Cr.
1 Bank A/C 9730
2 Van A/C 35000
3 Lloyd's Bank A/C 2500
4 Office Fixtures A/C 2590
5 Cash in Hand A/C 3580
6 Quick Office Ltd. A/C 1100

7 Capital A/C 47300
Total 50900 50900
Part 4
a) Income Statements of Airman Company for the year ended 30 September 2020:
REVENUES :
Sales 80000
(sales return ) 2000
Total Revenue 78000
(Cost of goods sold) 66120
Gross profit 11880
EXPENSES :
Carriage outward 400
Rent 5000
Motor expenses 1200
Telephone charges 620
insurance 830
Office expenses 600
Sundry expenses 300
TOTAL EXPENSE 8950
NET INCOME 2930
Working note:

COGS = STARTING INVENTORY+ PURCHASE-PURCHASE RETURN- CLOSING INVENTORY
=66120
b) Covid 19 has adversely affected the business activities. Production process of companies has
been stopped for a lock down period due to government regulations and lack of availability of
raw materials, workers have heavily affected the inventory turnover. The covid 19 situations still
affecting ,10 years back 2009 the production activities were in good flow and sales of goods was
too good and the company had earned maximum profit in the previous years and now profit of
company is going downwards due to low sales.
Impacts of Covid 19 on Income statements of Airman Co.:
a) Inventory of the company:
Inventory of the company has been adversely affected due to the covid situation, since 2009 the
inventory turnover of the company was in good flow, there was no over storage or shortage of
the inventory but due to the covid 19 situations the company's warehouse cost has been affected
adversely.
b) Carriage Inward and Outward expenses:
The carriage inward and outward expenses due to covid 19 has also been affected as due to covid
19 the petrol and diesel charges has been increased and since 2009 these expenses were not that
much as these are now. The availability of transport workers also has been affected as people are
scared to travel from one place to other places.
c) Rent:
Paying rent has become difficult as profitably ratio has decreased due to low sales
Goods and as sales has decreased warehouse charges are increasing for the company. Since 2009
the company was earning good so this problem was not there.
d)Sales of goods:
Sales of Airman company has decreased due to covid 19 situations and since 2009 the sales of
the company were too good, that duration was profitable. The company has reached low
profitable level because expenses are increasing and profit is decreasing due to low sales.
e) Cost of Goods sold:

Availability of Raw material has become difficult as compared to previous time also prices of
raw material has increase, lack of availability of carriage inward, paying rent of factory, etc. has
increased cost of goods sold and it has impacted the profitability of the company.
The situation of company is not good as before, the company has low profitably, more cost of
goods sold, more expenses of transportation, low sales all the factors of income statement has
proved that the since 2009 period was better than 2020 covid period.
f) Account Receivable:
Due to covid 19 the debtors are also delaying paying the amount its making the company less
liquidate as compared to before, the company used to receive the more cash since 2009. 2020
situation has become worst as the company is unable to sell more goods and also collection
period has also increased as compare to before the company is trying to recover the losses which
it has bear in lock down. The lock down period was bad period for company because it has led
the company's position down as compare to before. The distribution area of sales has also
decreased because most of the people are scared to buy the products.
CONCLUSION
By summarizing report it can be articulated that accounting plays an important role in
decision making and provides information for evaluation of company's position and it also
provides information in journal entries , ledger, trial balance, and income statements and also
gives the accurate information so company can compare its position from past data and evaluate
the factors that need improvement for company growth and also shows the irrelevant factor
whose cost can be deducted to lower down the cost of production. Strategies can be made to
bring changes in cost of goods sale and sales strategies can be made. The strategies should be
more productive as compared to before because the market has changed so the ideas and
strategies should also be changed so the company can recover and gain growth.

REFERENCES
Books and Journals
B Romney, M., 2018. Accounting information systems. Pearson Education Limited.
Bagdasaryan, R., 2019. The Structure of the Trial Balance. In International Conference on
Integrated Science.–Springer, Cham (pp. 103-116).
Collier, P. M., 2015. Accounting for managers: Interpreting accounting information for decision
making. John Wiley & Sons.
Jensen, T. and et.al., 2015. Fundamental accounting principles. W. Ross MacDonald School
Resource Services Library.
Russell, S., Milne, M. J. and Dey, C., 2017. Accounts of nature and the nature of
accounts. Accounting, Auditing & Accountability Journal.
Warren, C. S., Jonick, C. and Schneider, J., 2020. Accounting. Cengage Learning.
Weigand, H., Blums, I. and de Kruijff, J., 2020. Shared Ledger Accounting—Implementing the
Economic Exchange pattern. Information Systems. 90. p.101437.