Recording Business Transactions

Recording Business
Transactions

Table of Contents
INTRODUCTION..........................................................................................................................3
PART A..........................................................................................................................................3
(a) Journal entries in the books of Linda....................................................................................3
(b) Ledger accounts in the books of Linda.................................................................................5
(c) Trial balance as at 31st October in the books of Linda.........................................................5
(d) Prepare profitability statement for the period ended 31 October 2020.................................6
(e) Financial Position of Linda's Business as at 31st October 2020...........................................7
(f) Letter to Linda explaining about what drawings are concerning small businesses...............9
PART B..........................................................................................................................................9
(i) Calculation of ratios in the books of Linda............................................................................9
(ii) Analysis of Linda's Financial performance with ratios......................................................11
REFERENCES.............................................................................................................................14
APPENDIX...................................................................................................................................15

INTRODUCTION
Business transactions are generally summarized in the books of journals and ledgers
which are used in preparation of financial statements. It is important that every business to
effectively record their business transactions every day because it helps in taking important
decisions. The report will discuss about the financial statements of Linda's business which
includes journal, ledger, trial balance, income statements and balance sheet. The study will also
explain about what drawings are concerning small business and how it is treated. Further the
report will discuss about the ratios and with the comparison to competitor firm's ratio company
will analyse its financial position. Along with this it will evaluate that how company will
improve financial performance and position in the market.
PART A
Journal entries are the records of the business transactions in the books of accounts of a
company. It includes the date of transaction, ledger folio column, the amount of debit and credit
and an explanation after each entry of the transaction also known as narration. These entries are
done by using three golden rules of accounting - Debit the receiver and credit the giver for
personal accounts, debit what comes in and credit what goes out for real accounts and debit all
expenses and losses and credit all incomes and gains for nominal accounts.
(a) Journal entries in the books of Linda
Date Particulars L/F Debit(£) Credit(£)
01/10/20 Bank A/c Dr
Cash A/c Dr
Van A/c Dr
To capital A/c
(Being Linda introduced capital in the form of
bank, cash and van)
8000
5200
3000
16200
02/10/20 Laptop A/c Dr
To Bank A/c
(Being Laptop purchased from Oxford local
shop by paying cheque)
1000
1000

04/10/20 Purchased A/c Dr
To Toys Ltd
(Being goods purchased on credit from toys
limited)
2450
2450
05/10/20 Bank A/c Dr
To Sales A/c
(Being goods sold and received amount in
bank)
1500
1500
12/10/20 Repairing A/c Dr
To Cash a/c
(Being cash paid for repairing laptop )
80
80
18/10/20 Toys Ltd A/c Dr
To Purchase Return A/c
(Being goods return to Toys Ltd )
100
100
21/10/20 Bank A/c Dr
To Rent A/c
(Being Rent received from the premises)
500
500
23/10/20 Cash A/c Dr
Fred A/c Dr
To Sales A/c
(Being good sold on credit to Fred and 80 %
cash revived )
1500
400
1900
23/10/20 Cash A/c Dr
To sales A/c
(Being goods sold to David in cash)
500
500
24/10/20 Car A/c Dr
To Bank A/c
(Being second hand car purchased From
Oxford motor vehicle auction sale)
2500
2500