Recording Business Transactions

This report discusses the importance of recording business transactions and the need for accounting information in decision-making. It covers topics such as identifying decision makers, advantages and disadvantages of recording accounting information, journal entries, ledger and trial balance examples, and the impact of COVID-19 on profit and loss statements. Find comprehensive study material on business transactions at Desklib.

Recording
Business
Transactions

Table of Contents
INTRODUCTION...........................................................................................................................3
ASSESSMENT 1.............................................................................................................................3
PART 1............................................................................................................................................3
A. Identify the decision makers and need of accounting information:........................................3
B. Advantage and Disadvantage of recording accounting information:......................................3
PART 2............................................................................................................................................4
Journal entries for the David wises with narrations:....................................................................4
PART 3............................................................................................................................................5
Ledger and trial balance of Pearce & sons:.................................................................................5
PART 4............................................................................................................................................7
Profit and loss statement for Airman co,:....................................................................................7
Impact of COVID-19 on profit and loss statement of the company:...........................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Business transaction refer to process that is involving an exchange of goods and services
between two and more parties. Business transaction are the activities which is operated in
business in terms of buying and selling products in credit and cash basis. For example, firm
purchase a machinery in cash, it is a transaction for firm that it has to record in its financial
statements. Financial statements refers to which contains expenses, income, liabilities and assets
of the firm that includes profit and loss statement and balance sheet. Business transactions are
events which measures in monetary terms that shows financial position of the company. The
report is based on recording business transactions. This report covers topic such as importance of
accounting and decision-making, journal, ledger, impact of COVID-19 in firms financial
position, trail balance and income statements of the companies (Broy, 2016).
ASSESSMENT 1
PART 1
A. Identify the decision makers and need of accounting information:
Financial accounting refers to recording, summarizing and reporting a firms transactions
by its financial statements. Financial statements includes cash flow, income statement and
balance sheet. It is used by firm to show its financial performance and position to external parties
such as stakeholders for investment decisions. Financial accounting not only used by
stakeholders but it can be uses by internal parties in various ways. It follows common standard
such as General accepted accounting principles (GAAP). It provides information to managers
for arrangement of resources and effective decision making that helps it in tracking its activities.
The information helps management to decision making regarding hiring employees, compensate,
investment etc (Fahimirad, 2016). it is important for management as it allows them to manage
and control the firms activities. The main role of accounting is to maintain the systematic and
accurate record of all financial transactions of the company.
B. Advantage and Disadvantage of recording accounting information:
Accounting is refers to measurement, processing and communication of financial records
in accurate way of government, businesses and tax authorities. Accounting has some terms such
as expenses, income, liability, assets, cash flows, income statement and balance sheet. It has pre

decided process for recording transactions that includes journal, ledger and trail balance.
Accounting information helps managers for decision-making regarding business activities such
as selling and promotions, distribution, warehousing, inventories, fund management and uses of
its resources (Gilman, 2016).
Advantages of recording accounting information: Mentioned below are some
advantages of accounting information:
 It keeps maintenance of business records such as its expenses and income whether it is
credit and cash.
 Accounting information helps in effective decision-making related to business activities.
 It provides information to internal and external both parties.
 As it is depends on past data it helps in future for comparison of its performance via ratio
analysis that tells business about its liquidity, solvency and profitability (Ionascu and
Ionascu, 2018).
Disadvantages of recording accounting information: Disadvantages of recording
accounting information are mentioned below:
 It can be biased according to the situation and it is not possible to change it frequently.
 Recording of fixed assets at original cost.
 It records all transactions of overall business as a whole rather than different departments.
PART 2
Journal entries for the David wises with narrations:
Journal entries of the David wises for the year 2020 are mentioned below:
Journal Entries
S. NO Date Particulars L.F £ £
1 01/02/20 purchase return A/C Dr. 350
To Purchase A/c 350
( Being purchase return with full
settlement)
2 04/02/20 Bad debts A/c Dr. 85
To S. keys A/c 85

(being debt debt written off by S.
keys)
3 09/02/20 Machinery A/c DR. 2300
To Bank 200
To TS CO. 2100
( Being machinery purchase with
cash Rs. 200 and 2100 on credit)
4 13/02/20 Cash account 220
Bad debts A/c 50
To S. hill Ltd. 270
( money owed by S. hill 270 and paid
only 220, Rs. 50 declare as bad
debts)
5 20/02/20 Drawing A/s Dr. 180
To Stock 180
6 26/02/20 Insurance A/c Dr. 85
To Cash A/c 85
( Business paid money for private
house insurance)
7 28/02/20 Machinery A/c DR. 1050
To bank A/c 1050
(amount paid by TS CO. for half
amount credit on machinery)
Total 4320 4320

PART 3
Ledger and trial balance of Pearce & sons:
Ledger accounts of the Pearce & sons:
Ledger Accounts
(Amounts in GBP)
Capital Account
Date Particulars Amt. Date Particulars Amt.
01/02/20 By Bank A/c 21500
01/02/20 By Van A/c 25000
01/02/20 By Office Fixture A/c 800
29/02/20 To Balance c/f 47300
Total 47300 Total 47300
Bank Account
Date Particulars Amt. Date Particulars Amt.
03/02/20 By Cash A/c 1500 01/02/20 To Capital A/c 21500
04/02/20 By Van A/c 4800 02/02/20 To Loan A/c 2500
19/02/20 By Nissan Co. A/c 5200 25/02/20 To Cash A/c 350
28/02/20 By Office Fixture A/c 620
29/02/20 By Balance c/f 12230
Total 24350 Total 24350
Cash Account
Date Particulars Amt. Date Particulars Amt.
15/02/20 By Office Fixture A/c 70 03/02/20 To Bank A/c 1500
25/02/20 By Bank A/c 350
29/02/20 By Balance c/f 1080

Total 1500 Total 1500
Office Fixture Account
Date Particulars Amt. Date Particulars Amt.
01/02/20 To Capital A/c 800
05/02/20 To Quick Office Ltd A/c 1100
15/02/20 To Cash A/c 70
28/02/20 To Bank A/c 620
29/02/20 By Balance c/f 2590
Total 2590 Total 2590
Van Account
Date Particulars Amt. Date ParticularsAmt. Amt.
01/02/20 To Capital A/c 25000
04/02/20 To Bank A/c 4800
08/02/20 To Nissan Co. A/c 5200
29/02/20 By Balance c/f 35000
Total 35000 Total 35000
Quick Office Ltd Account
Date Particulars Amt. Date Particulars Amt.
05/02/20 By Office Fixture A/c 1100
29/02/20 To Balance c/f 1100
Total 1100 Total 1100
Office Fixture Account
Date Particulars Amt. Date Particulars Amt.
01/02/20 To Capital A/c 800
05/02/20 To Quick Office Ltd A/c 1100

15/02/20 To Cash A/c 70
28/02/20 To Bank A/c 620
29/02/20 By Balance c/f 2590
Total 2590 Total 2590
Nissan Co. Account
Date Particulars Amt. Amt. Date Particulars Amt.
08/02/20 By Van A/c 5200 19/02/20 To Bank A/c 5200
Total 5200 Total 5200
Loan Account
Date Particulars Amt. Date Particulars Amt.
02/02/20 By Bank A/c 2500
29/02/20 By Balance c/f 2500
Total 2500 Total 2500
Trail balance for the year ending 29 Feb. 2020 mentioned below:
Trial Balance
(in the month ending 29/02/2020)
(Amounts in GBP)
Particulars Debit Credit
Capital Account 47300
Bank Account 12230
Cash Account 1080
Van Account 35000
Quick Office Ltd. Account 1100
Office Fixture Account 2590
Loan Account 2500

Total 50900 50900
PART 4
Profit and loss statement for Airman co,:
P & L account for the year ending 30th Sep. 2020 of Airman co. mentioned below:
Profit & Loss Account
(In the year ending 30th Sept 20)
Particulars Amount Particulars Amount
Opening Stock 36000 Sales 80000
Purchases 150000 Less: Returns Inwards -2000 78000
Less: Returns Outwards -600 149400 Closing Stock 120000
Carriage Inwards 720
Gross Profit c/f 11880
Total 198000 Total 198000
Carriage Outwards 400 Gross Profit c/d 11880
Motor Expenses 1200
Rent 5000
Telephone Charges 620
Wages and Salaries 32000
Insurance 830
Office Expenses 600
Sundry Expenses 300
Net profit / (loss) -29070
Total 11880 Total 11880
Impact of COVID-19 on profit and loss statement of the company:
Profit and loss statement is the part of financial statements that includes expenses and
income of the firm in a particular time period. It defined net profit by deducted all expenses from
income and helps firm to know about its financial position and future decision-making (Juriansz
and Nehme, 2016). There are various factors which can affects a business financial position
including, political, economic, social, legal, environmental and social. In COVID-19, it affects

various firms sales and profitability. Airman co. which achieve higher profitability from the last
5 years, in this COVID-19 situation it faces various challenges. In two quarters from Oct. to
March firm has sustainable income but after the lock down its sales breakdown and that
decreases its profitability (Obisesan and Olayide, 2020). Firm purchase enough stock for selling
purpose but firms sales shows almost half of its purchase that affects its gross profit. In lock
down situation it reduces sales but has to paid all fixed expenses as rent, telephone charges,
wages and salary, insurance, office expenses etc. because of no sale and cost of these expenses
firm faces loss that is around 29070.
CONCLUSION
From the above report it has been concluded that business transactions refers to
interchange of goods and services with the money in a particular time period. Every firm should
record its business transactions which are occurs from buying and selling of goods and services.
Financial accounting refers to recording, summarising and reporting all transactions in terms of
money that helps internal and external factors of business in effective and efficient decision
making. Financial accounting includes, journal, ledger, trail balance, income statement and
balance sheet. In COVID 19 situation it affects various business profitability. It provides
information to managers for arrangement of resources and effective decision making that helps it
in tracking its activities.

REFERENCES
Books and journals:
Broy, M., 2016, June. From actions, transactions, and processes to services. In International
Conference on Application and Theory of Petri Nets and Concurrency (pp. 13-19). Springer,
Cham.
Fahimirad, M., 2016. The Iran Deal: How the Legal Implementation of the Deal puts the United
States at a Disadvantage both Economically and in Influencing the Future of Iran's Business
Transactions. Nw. J. Int'l L. & Bus.. 37. p.301.
Gilman, A. J., 2016. The Legal Risks Associated With Letters of Intent, Proposal Letters, and
Commitment Letters in Finance and Other Business Transactions.
Ionascu, I. and Ionascu, M., 2018. Business models for circular economy and sustainable
development: The case of lease transactions. Amfiteatru Economic. 20(48). pp.356-372.
Juriansz, J. and Nehme, M., 2016. Corruption, international business transactions and the OECD.
Transnational Governance: Emerging Models of Global Legal Regulation. p.111.
Obisesan, O. O. and Olayide, O.E., 2020. Asymmetric information, business environment, and
transactions costs among business owners in Nigeria: Implications for female entrepreneurial
sustainability transitions. Business Strategy & Development.