Evaluation of Financial Performance of a Business through Journal Entries, Ledger Account, Trial Balance, Income Statement and Ratio Analysis

The report focuses on evaluating the financial performance of a business through journal entries, ledger account, trial balance, income statement and ratio analysis. It emphasizes the importance of accurate and reliable information for making strategic decisions. The report also includes a detailed analysis of the profitability, liquidity and efficiency ratios of the business. The outbreak of COVID-19 has also affected the ratios of the company. The report concludes with the need for appropriate execution of actions to improve the functioning of the business.

WRITTEN PROJECT

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................2
a) Journal entries..........................................................................................................................2
b) ledger account..........................................................................................................................5
c) Trial balance..........................................................................................................................16
d) Income statement...................................................................................................................17
e)................................................................................................................................................19
f).................................................................................................................................................21
PART B.........................................................................................................................................22
a)................................................................................................................................................22
b)................................................................................................................................................25
CONCLUSION..............................................................................................................................26
REFERENCES..............................................................................................................................27

INTRODUCTION
Recording business transaction is one of the significant method of keeping the information
associated with the different types of transaction conducted for generating the higher
profitability & sustainability in market. The present working environment has become too
complex where information based decision can allow to get the ability to overcome prevailing
circumstances the present report is based on evaluating the crucial approaches which can help in
achieving accurate, relevant and reliable information so that formulating decision in effective
manner can become possible. The current study will emphasize on having relevant formulation
of journal entries, ledger account, trial balance, income statement and financial position. This
will permit to get the fair insights regarding the performance of business in terms of financial
health. It will allow to get the accurate information so that prevailing lacking area can be
assessed to recognize the prevailing lacking areas so that profit offering situation can have
formulated by eliminating non crucial aspects. The present study will focus on having
calculation regarding the ratios so that proper evaluation of organizational performance can be
done.
1

MAIN BODY
a) Journal entries
2

3

4

b) ledger account
5

6

7

8

9

10

11

12

13

14

15

c) Trial balance
16

d) Income statement
17

Income statement is the highly used one of the financial statement that pay attention on
articulating information regarding expenses and gain obtained for particular span of time.
There are number of benefits which can be received by organization for having effective
evaluation of the prevailing circumstances so that higher ability to make strategic decision can
be derived. In addition to this, the mentioned firm has executed expenses so that higher
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profitability providing situation can be created. This specific statement allows the firm to have
accurate information about operational efficiency in tur building good performance to gain
trustworthiness in market can become possible. From the evaluation of the given information it
can be specified that firm has not effectively executed the activities like planning, allocating and
controlling monetary resources. It is resulting into greater amount expenditure than the earning
obtained which tend to outcome into losses. For the specified period of time the organization
e)
Balance sheet is helpful in achieving the organiztaional ojective of getting the higher
profitability so that significant appliation to receive desirable position in sector can become
possibe.
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From the assessment of the given table above it can be recognized that specific firm is
performing effective which is favorable sign of growth & development. In addition to
this, it has followed accounting equation which states that liabilities plus equity equals
to total assets. From the evalaution of given information it can be mentioned that
particula business has enough crrent assests which is refleting that businesss is having
proper ability to accomplish the organiational objective. There is no larger liabilities
which can adversly influnce the functioning of business. On the basis of this, it can be
mentioned that business is not properly executing management of action as there is
withdrwal activity that is hampering its financial position. There are number of benefits
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of having fianncial position into the organizational process thata llow to get sumamrized
details so that startegic decision can be made. It permits number of stakeholder to have
proper inforamtion about the bsuiness functioning so that sound decision making that can
favotably impact fuctioning of company can become possible.
f)
To owner
Subject: concern regarding withdrawal
There are number of activities which are required to be executed by company in order to gain
the higher profitability so that objective of organization can be accomplished. From the
evaluation of the current business practices it can be identified that business is having various
complications which are required to be improved for deriving greater amount of flexibility so
that higher progress in current competitive environment. To become successful in the present
working scenario, it is important for the organization to largely focus on gaining highly effective
functioning by ensuing greater amount of productiveness by implementing diverse working
scenario (Albrecht and Kortelainen, 2021). In this respect from the evaluation of the provided
circumstances it can be mentioned that there is need to execute such course of action which can
incline its competitiveness that permit to deal with such circumstances that properly allow the
business to have highly effective and efficient result achieving capacity.
On the basis of conducted evaluation, it can be specified that firm should to have relevant
course of action which can improve the functioning of business that can incline the
productiveness in turn proper compliance with prevailing circumstances can be derived. From
the analysis of the given information regarding the business circumstances it can be interpreted
that corporate is having various lacking areas such as having ineffective application of
expenses such as wages , etc. which is impacting the functioning of business (Oh and Penman,
2020). In order to become successful in the present scenario, sole trader should give emphasis on
having appropriate execution of action that lead firm towards success. From the assessment of
the given details about the business processing it is articulated that firm is leading towards
failure due to inaccurate execution of processing which is hampering growth & development of
enterprise. In this respect it can be recognized that there is lack of significant evaluation of
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requirement of each department that is impacting frim adversely. with respect to this, it can be
recognized that there is no proper management and controlling procedure which needs specified
frim to give emphasis on having proper development of activities that can boost potential to
generate profitability.
On the basis of given details regarding balance sheet of the firm it can be mentioned that there
is need to focus on gaining relevant practices that can increase profitability and sustainability. It
has been prepared on the basis of accounting equation which articulates that company’s assets
are equal to liabilities plus equities (Bekhradinasab, 2020). The specified firm is having enough
capability to get overcome prevailing obligation which is good sign of growth and development.
There is need to focus on ensuring optimum utilization of resources that boost overall
performance of enterprise by increasing profitability. There is no significant implementation of
action that is highly suitable for business to get better potential to achieve desirable position in
sector. This can be executed by fixing accurate price, avoiding over and understocking,
significant job costing and appropriate cost structure so that better adherence changing
circumstance can become possible. On the basis of this information, it can be depicted that there
is requirement to apply such tactic that is inclining the effectiveness of business in turn aiming
better performance of business can become successful.
The major lacking part that is recognized is conducting irrelevant execution of withdrawal
action which is hampering the growth and development of business. In addition to this, as being
sole proprietor the functioning of company can effectively get hampered so eliminating this is
considered to be important. For this purpose, it is recognized to the company to give emphasis
on developing the approach that can avoid implication of this irrelevant expenses for increasing
its competitiveness.
PART B
a)
in the current era, evaluating the organizational performance is important as it allows to
make the strategic decision (Oh and Penman, 2020). There are number of objective of business
and other connected people such as optimum utilization of resources, higher effective return,
greater credibility and trustworthiness, etc. In respect to get the higher profitability and
sustainability it becomes essential for the organization to focus on gaining accurate & reliable
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information so that strategic decision making can become possible. Ratio analysis is one of the
significant technique that is largely helpful in meeting greater productive results by allowing to
make decision on the basis of information.
Profiitability ratios are the one of the significant ratio that is helpful for number of
stakeholders that contribte in achiving details to make startegic decsion (Cotter, 2022). There
are two types of profitability ratio has been computed such as gross and net profitability. The
gorss profit refers to ability to obatin gain by reducing cost of goods sold. Ne roftability is
related with having capability to achiev higher profitability by makimg greater amount of sales.
Liquidity ratio is viewed by numbe of stakholders such as creditors, leders, suppliers,
etc in order to check efficinecy to meet obliations (Wang and et.al., 2022). The recent study has
given information about quick and current ration that are useful in estimating efficinecy of firm
to overcome short trem liabilities. Current ratio is helpful in reflecting perforamnce of company
in terms to handle current liabilities with usage of stock, bank, debtor, etc assets. Whereas quick
rtaio is helpful in indiacting that how business is meeting the short term liabilities requirment
via using cash & equivalent resurces.
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Efficiency of the organiztaion play important role in influnecing the functioning of
business by impactin its credibility & trustwothiness. It is important metrics that is taken into
consideration by leners, suppliers,fianncial institutions, etc to evalaute its ability to pay off
and collect due payments. This play significant part in affecting the decision making criteria of
organization.
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b)
With the above analysis it is clear that the performance of Anne is not much better and
effective and in comparison to other competitor as well. With respect to the gross profit ratio it is
only 13 % but in past years the profit was good. But in the year 2021, the gross profit margin
was only 8 % but company is having much better. But in case of net profit margin the
company’s performance is not good. This is because of the reason that in the case of company
there is net loss and because of this there is net loss of 3.75%. hence, with this it can be implied
that the profitability of the company is not good.
Along with this the current ratio is 3.08 times which is far more than the competitor
average. The current ratio of 3 times is more because it implies that company is having 3 times
current asset for paying off a single current liability (Zavadskas and et.al., 2018). In accordance
with the ideal ratio it is said that there must be 2 times current asset for paying off the current
liabilities. In addition to this, quick ratio of the company is also very high in comparison to the
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competition and is not good. Thus, it can be stated that the liquidity position of the company is
also not good in comparison to the average of competitors.
Moreover, with respect to the efficiency ratios it is clear that in terms of efficiency ratio
company is performing well in comparison to the competitors. with respect to the receivable
day’s company is having 10 days which implies that company will get the receivables in 10
days. But on the other side, competitors are having more days and this implies that they will take
more time to convert their debt into cash (Liang, Zhao and Hong, 2019). Moreover, in case of
account payable the company is having 25 days and other competitors are having less. Thus, it is
evident that the competitors are having better payable days. This is because too high payable
ratio is also not good for the company as it outlines the fact that credit worthiness of the
company is not good.
Further, the outbreak of COVID 19 has also affected the ratios of the company. the
reason behind this fact is that due to present pandemic the performance of each and every
economy has been affected negatively (Choi and et.al., 2018). So in the same context the
profitability and working efficiency of the company has also been affected in negative manner.
Thus, as a result of this the working and profits of business has drastically reduced.
CONCLUSION
With the above report it is clear that the recording of every business transaction is
essential for the success of the business. In case the transactions will not be appropriately
recorded then this will be affecting the profitability of business. the above analysis highlighted
the fact that calculating the profits and preparing the balance sheet is essential. Further it was
also evaluated that with respect to the ratio the performance of the company is not good and
effective in comparison to other competitors.
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REFERENCES
Books and Journals
Albrecht, M. and Kortelainen, J., 2021. Recoding of an industrial town: bioeconomy hype as a
cure from decline?. European Planning Studies. 29(1). pp.57-74.
Bekhradinasab, V., 2020. The role of strategic management in capital markets in relation to
income statement Vahid Bekhradinasab. Scientific Journal of Budget and Finance
Strategic Research. 1(2). pp.132-166.
Choi, K. B., and et.al., 2018. Amplification ratio analysis of a bridge-type mechanical
amplification mechanism based on a fully compliant model. Mechanism and Machine
Theory. 121. pp.355-372.
Cotter, T. S., 2022. General Accounting and Finance Fundamentals. In Engineering Managerial
Economic Decision and Risk Analysis (pp. 37-62). Springer, Cham.
Liang, W., Zhao, G. and Hong, C., 2019. Selecting the optimal mining method with extended
multi-objective optimization by ratio analysis plus the full multiplicative form
(MULTIMOORA) approach. Neural Computing and Applications. 31(10). pp.5871-5886.
Oh, H. I. and Penman, S. H., 2020. Income statement mismatching has not reduced the
information conveyed by accounting over time. Available at SSRN 3778173.
Wang, Y and et.al., 2022. Other comprehensive income, corporate governance, and firm
performance in China. Managerial and Decision Economics. 43(1). pp.262-271.
Zavadskas, E. K., and et.al., 2018. A novel multicriteria approach–rough step-wise weight
assessment ratio analysis method (R-SWARA) and its application in logistics. Studies in
Informatics and Control, 27(1), pp.97-106.
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