Recording Business Transaction: Importance, Advantages, and Disadvantages

RECORDING
BUSINESS
TRANSACTION

Table of Contents
INTRODUCTION...........................................................................................................................1
ASSESSMENT 1.............................................................................................................................1
PART 1............................................................................................................................................1
Decision makers and their need for accounting information: .....................................................1
Advantage and Disadvantage of recording accounting information:..........................................2
PART 2............................................................................................................................................4
Journal entries with narration for the David wises:.....................................................................4
PART 3............................................................................................................................................5
Ledger and trail balance of Pearce & sons:................................................................................5
PART 4............................................................................................................................................6
Income statement for Airman co.:...............................................................................................6
Impact of COVID 19 on company income statement items:.......................................................7
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
A business transaction refers to the transaction in which the transaction of goods, services
occur between two or more people or the parties sharing the common view. It must be
measurable and recorded in term of money in the accounting system. They are conducting the
transaction for there mutual benefits for example there is a transaction between the customer and
shopkeeper (Chow and Schoenbaum, 2020). These transactions affects the overall position like
its assets, liabilities, incomes, expenditure. It affects the financial position of the organisation and
find out the profit and loss the company is getting affected. There are the different types of the
business transactions cash and credit transactions, internal and the external transactions takes
place in the organisation. This report consider various transactions of the business. They covers
the topic like journal, trial balance, ledger and the ratios to find the efficiency of the business and
to analysis the competitors competition.
ASSESSMENT 1
PART 1
Decision makers and their need for accounting information:
Chief finance officer helps to take the decision in the company and is responsible for the
financial actions so the decisions are to be taken in the proper manner and will not affect the
organisation. The duties of the CFO is to have the proper tracking on the cash flows and helps in
finding the strength and weakness of the company. Strategic managers helps in taking the
decisions as they are the top management in the organisation and they have to take the decisions
and should communicate the direction to the team members so that they can perform better and
can achieve the task. Finance manager helps in taking the decisions regarding the assets of the
company and managing them properly in an organisation. It helps in analysing the internal and
the external variables that affect the organisation and take the decision in an proper manner.
Financial accounting is a process of three elements in which the recording, summarizing and the
reporting in the organisation takes place in an easy way. The financial statements helps in finding
the income statement, balance sheet and the profit and loss account. It helps in following the cash
basis accounting and help in doing the transactions in the accounting. Revenue includes the
receipt and the payment of the organisation. It helps in tracking the activities in the organisation
so that the decision can be take and help in forecasting. It helps in identifying and regulating the

day to day activities of the organisation by which future benefits can be generated and help in
identifying the growth in the business. It helps in knowing the resources in the organisation
which are beneficial and help in identifying its growth so that the opportunities will be
accomplished in the organisation. It helps in identifying the resources which are profitable to the
organisation so that the proper evaluation can be done in an easy manner (Tillman, 2017). There
are the internal and the external managers in the organisation which help in taking the decision in
the organisation regarding the sales, marketing, promotional activities, hiring compensation
which help in taking the decision in an easy way. Investors used the information which is worth
for the organisation to set the prices and the share prices in the organisation. It is used by the
various people in various ways which help in setting the common standard in the organisation
known as the accounting standard and the generally accepted accounting principles (GAAP)
(Warren, Jonick and Schneider, 2020). It helps in analysing the past data in the organisation and
help in finding the reasons of the changes in the organisation so that the organisation is not
affected in the future and helps in taking the decision regarding the activities in the organisation
for getting the good results in future.
Advantage and Disadvantage of recording accounting information:
Advantages of recording accounting information:
 The records should be kept in the proper manner so the tax will be easily saved which
helps in proper record of the transaction so that the owners are able to proof themselves
and the various expenses that incurred in the business to carry out day to day operations
of the business.
 The accounting records helps in backing up all the expense and the incomes that incurred
in the business at the time of the audit (Gordon, 2015). Without the proper recording of
the goods the auditors takes the decision which suited them the best.
 The accounting system shortens the time of the audit task which has to be completed. If
the accounts are maintained in a proper manner they are required to fill the form of the
income tax return . Once the accounts are verified in a proper manner the auditors find he
accuracy and help in taking the decision easily and spend the less time in the business.