Recording Business Transaction: Journal, Ledger, Trial Balance, Income Statement, Balance Sheet

This report explains how to record business transactions in the journal, prepare general ledgers, formulate the trial balance, construct the income statement, and provide details of the balance sheet. It also covers determining accounting ratios and explaining the impact of Covid-19 on business profits. The report includes examples and explanations to help readers understand the concepts better.

Recording Business
Transaction

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK...............................................................................................................................................3
PART A ..........................................................................................................................................3
a) Record the enterprise proceedings in the journal...............................................................3
b) Prepare general ledgers......................................................................................................5
c) Formulate the Trial Balance...............................................................................................9
d) Construct the Income Statement........................................................................................9
e) Provide details of the Balance Sheet................................................................................10
f) Determine what are drawings and explain it to Linda......................................................11
PART B .........................................................................................................................................11
a) Determine the Accounting Ratios of the Business...........................................................11
b) Explain the impact of Covid-19 on the profits of the business........................................12
CONCLUSION .............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
The business transactions refer to the happenings in the business which is related to either
its operations or non-operations which help the business in earning a revenue. These transactions
are recorded in the books of accounts of the business and determines how a business is doing
financially (PURI, and SINGH, 2021). These transactions may occur in the business when they
sell its products and services in the market of when it acquires raw materials from the markets.
These transactions are recorded and summaries to determine the profit or loss earned by the
business in a given period of time which is called the accounting period or fiscal period. This
report highlights how these transactions are recorded and summarised in the defined accounting
period and shows how different financial statements are prepared in the business.
TASK
PART A
a) Record the enterprise proceedings in the journal
JOURNAL ENTRIES
Date Particulars Debit Credit
01/10/21 Bank
Cash
Flat
Car
Capital
(Business being started with cash, flat and a car)
10000
4800
45000
12000
71800
02/10/21 Purchases
Home Ltd
(goods of the firm i.e., furniture being purchased on
credit from Home ltd.)
5400
5400
04/10/21 Computer
Printer
Bank
800
200
1000

(Computer and printer being bought for cash)
05/10/21 Bank
Sales
(Goods worth 2800 being sold)
2800
2800
12/10/21 Repair Expense
Cash
(repair expenses incurred for repairs done in printer)
110
110
18/10/21 Home Ltd.
Purchases return
(Furniture of wroth 250 being returned to home ltd.)
250
250
21/10/21 Bank
Rent Income
(Rent being received by the organisation)
800
800
23/10/21 Accounts Receivable
Cash
Sales
(sold goods to Rayan worth 2100, out of which, 1800
have been received by the business)
300
1800
2100
23/10/21 Cash
Sales
(sold goods to David for cash)
700 700
24/10/21 Laptop
Bank
(A new laptop has been bought for official use.
1700
1700
26/10/21 Wages
Bank
(shopkeeper has been paid monthly wages)
820
820
30/10/21 Rent Expenses 850

Bank
(a place being rented by the business and paid expenses
for same)
850
31/10/21 Drawings
Bank
(Money being paid by the business for a personal
expense of the owner)
1200
1200
31/10/21 Cash
Accounts Receivable
(Rayan, the debtor of the business paid for the debt)
150
150
b) Prepare general ledgers
Bank Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 10000 04/10/21 Computer 800
21/10/21 Rent 800 04/10/21 Printer 200
05/10/21 Sales 2800 24/10/21 Laptop 1700
26/10/21 Wages 820
30/10/21 Rent 850
31/10/21 Drawings 1200
31/10/21 Balance c/d 8030
13600 13600
01/11/21 Balance b/d 8030
Cash Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 4800 12/10/21 Repair 110

23/10/21 Sales 1800
23/10/21 Sales 700
31/10/21 Accounts
Receivable
150 31/10/21 Balance c/d 7340
7450 7450
01/11/21 Balance b/d 7340
Flat Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 45000 31/10/21 Balance c/d 45000
45000 45000
Car Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 12000 31/10/21 Balance c/d 12000
12000 12000
01/11/21 Balance b/d 12000
Capital Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Bank 10000
01/10/21 Cash 4800
01/10/21 Flat 45000
31/10/21 Balance c/d 71800 01/10/21 Car 12000
71800 71800
01/11/21 Balance b/d 71800

Purchases Account
Date Particulars Ref Amount Date Particulars Ref Amount
18/10/21 Home Ltd 5400
31/10/21 Balance c/d 5400
5400 5400
01/11/21 Balance b/d 5400
Purchase Return Account
Date Particulars ref Amount Date Particulars Ref Amount
31/10/21 Balance c/d 250 02/10/21 Home Ltd 250
250 250
01/11/21 Balance b/d 250
Home Ltd Account
Date Particulars Ref Amount Date Particulars Ref Amount
02/10/21 Purchases return 250 18/10/21 Purchases 5400
31/10/21 Balance c/d 5150
5400 5400
01/11/21 Balance b/d 5150
Computer Account
Date Particulars Ref Amount Date Particulars Ref Amount
04/10/21 Bank 800 31/10/21 Balance c/d 800
800 800
01/11/21 Balance b/d 800

Printer Account
Date Particulars Ref Amount Date Particulars Ref Amount
04/10/21 Bank 200 31/10/21 Balance c/d 200
200 200
01/11/21 Balance b/d 200
Repair Expenses Account
Date Particulars Ref Amount Date Particulars Ref Amount
12/10/21 Cash 110 31/10/21 Balance c/d 110
110 110
01/11/21 Balance b/d 110
Rent Account
Date Particulars Ref Amount Date Particulars Ref Amount
21/10/21 Bank 850 30/10/21 Bank 800
31/10/21 Balance c/d 50
850 850
01/11/21 Balance b/d 50
Accounts Receivable Account
Date Particulars Ref Amount Date Particulars Ref Amount
23/10/21 Sales 300 31/10/21 Cash 150
31/10/21 Balance c/d 150
300 300
01/11/21 Balance b/d 150

Sales Account
Date Particulars Ref Amount Date Particulars Ref Amount
05/10/21 Bank 2800
23/10/21 Accounts Receivable 300
31/10/21 Balance C/d 5600 23/10/21 Cash 1800
23/10/21 Cash 700
5600 5600
01/11/21 Balance b/d 5600
Laptop Account
Date Particulars Ref Amount Date Particulars Ref Amount
24/10/21 Bank 1700 31/10/21 Balance c/d 1700
1700 1700
01/11/21 Balance b/d 1700
Wages Account
Date Particulars Ref Amount Date Particulars Ref Amount
26/10/21 Bank 820 31/10/21 Balance c/d 820
820 820
01/11/21 Balance b/d 820
Drawings Account
Date Particulars Ref Amount Date Particulars Ref Amount

31/10/21 Bank 1200 31/10/21 Balance c/d 1200
1200 1200
01/11/21 Balance b/d 1200
c) Formulate the Trial Balance.
Particulars Debit Credit
Bank 8030
Cash 7340
Flat 45000
Car 12000
Capital 71800
Purchases 5400
Purchases Return 250
Home Ltd 5150
Computer 800
Printer 200
Repair Expenses 110
Rent 50
Accounts receivable 150
Laptop 1700
Wages 820
Drawings 1200
Sales 5600
TOTALS 82800 82800

d) Construct the Income Statement
INCOME STATEMENT
Particulars Amount (£) Amount (£)
Net Sales 5600
Less: Cost of Goods Sold 4830
Purchases 5400
Closing Stock -320
Purchase Return -250
Gross Profit 770
Less: Operating Expenses 980
Repair Expenses 110
Rent 50
Wages 820
Net Loss -210
e) Provide details of the Balance Sheet
BALANCE SHEET
Particulars Amount (£ )
ASSETS
Current Assets:
Stock 320
Bank 8030
Cash 7340

Bills Receivable 150
Total Current Assets 15840
Fixed Assets:
Flat 45000
Car 12000
Computer 800
Printer 200
Laptop 1700
Total Fixed Assets 59700
Total ASSETS 75540
EQUITY AND LIABILITIES:
Liabilities:
Current Liabilities:
Creditors (Home Ltd.) 5150
Capital 71800
Less: Drawings -1200
Net Loss -210
Total Liabilities and Equity 77540
f) Determine what are drawings and explain it to Linda
Drawings is that amount of the business which is withdrawn by the owner of the business to pay
for a personal expense (Daud, Sudrajat, Maryani, and Effendi, 2021). These funds are not used
for anything related to the business but for the personal use of the owner. Business and business
owners are considered as two separate entities in the business theory hence these cannot be
defined as the business expense. It is explained to Linda that in the case of Anne, the sum of

1200 which have been paid by the business were the drawings done by Anne from the business
as these were paid from the business bank account for the holiday trip of Anne York.
PART B
a) Determine the Accounting Ratios of the Business
 Net Profit Margin = (Net profit / Net Sales) * 100 = (- 210 / 5600) * 100 = - 3.75 %
 Gross Profit Margin = (Gross Profit / Net Sales) * 100 = (770 / 5600) * 100 = 13.75 %
 Current Ratio = Current Assets / Current Liabilities (Wiratama, and Asri, 2020) =
15480 / 5150 = 3.01
 Acid Test ratio = (Current Assets – Stock) / Current Liabilities = (15480 – 320) / 5150 =
2.94
 Accounts Receivable Collection Period = (Average Debtors / Net Sales) * 365 = (150 /
5600) * 365 = 9.78 Days
 Accounts Payable Payment Period = (Average Creditors / Net Purchases) * 365 =
(5150 / 5150) * 365 = 365 Days
Interpretation: From the above calculation of ratios of Anne, it can be seen that the organisation
of Anne is not performing well when compared to the ratios of the competitors. It can be seen
that the competitors of the business are earning more profits at a less expenditure. The current
assets of these businesses are high in comparison to Anne's business. This creates a bad condition
for the business as it impacts the short term liquidity positions of the business (Yang, 2021). But
Anne's asset employment is better than most of the businesses which creates better hope for the
business.
b) Explain the impact of Covid-19 on the profits of the business
The Covid-19 pandemic has created chaos among the world and particularly in the business
world as the businesses, to cut the costs, reduced their production in the times of uncertainty
(Heister, Kaufman, and Yuthas, 2021). The business in the case have seen greater losses in the
business due to reduced demand in the marketplace. The decrease in the market interactions of
the business of Anne have decreased their sales revenue and in turn its profits have turned into
losses. It is advised to Anne that she should focus on covering up these losses in the year 2021 if
she wants to reach no profit-no loss condition. After that she can work on the production and

sales of the business to earn a little profit in the year 2022. The ratio investigation of fo Anne
displays the concern is handling in various losing and the concern has to focus on delivery
behind its operating cost. So, it can be terminated from the preceding discourse that Anne should
retool the concern scheme that they are having and direction on amended keeping in the market.
CONCLUSION
The above-mentioned report can be concluded by mentioning that accounting transactions
recording is an important aspect in the field of business as these helps the business to determine
the profits and financial performance of the business. The above report shows recordings of
different business transactions in the books of accounts and then summarising these in the
financial statements of the business. It also highlights the ratio analysis following the
interpretation of the these.

REFERENCES
Books and Journals
PURI, N. and SINGH, H., 2021. Current Trends in Finance in the Context of Adoption of
Principle-Based Accounting Standards in Accounting Education. Financial Intelligence
in Human Resources Management: New Directions and Applications for Industry 4.0.
Daud, Z.M., Sudrajat, J., Maryani, D. and Effendi, M.S., 2021, August. Android-Based Online
Inventory Information System Design for Micro, Small and Medium Enterprises
(MSMEs). In 2021 IEEE International Conference on Electronic Technology,
Communication and Information (ICETCI) (pp. 366-371). IEEE.
Yang, J., 2021, March. Network Security and Prevention of Accounting Information System in
the Era of Big Data. In The International Conference on Cyber Security Intelligence
and Analytics (pp. 856-860). Springer, Cham.
Heister, S., Kaufman, M. and Yuthas, K., 2021. Blockchain and the Future of Business Data
Analytics. Journal of Emerging Technologies in Accounting. 18(1). pp.87-98.