Recording Business Transaction

RECORDING BUSINESS
TRANSACTION

Contents
PART A...........................................................................................................................................1
a) Double entry recorded in T accounts (Appendix 1)...........................................................1
b) Balance the accounts and bring down on opening balance (Appendix 2).........................1
c) Trial balance as at 30th September 2019 (Appendix 3)......................................................1
d) Prepare an income statement for the period ended 30th September (Appendix 4).............1
e) Statement of financial position as at 30th September 2019 (Appendix 5)..........................1
PART B............................................................................................................................................1
i) Ratios for James..................................................................................................................1
ii) Analysis of performance....................................................................................................1
APPENDIX......................................................................................................................................3
Appendix 1.............................................................................................................................3
Appendix 2.............................................................................................................................4
Appendix 3.............................................................................................................................8
Appendix 4.............................................................................................................................9
Appendix 5.............................................................................................................................9

PART A
a) Double entry recorded in T accounts (Appendix 1)
b) Balance the accounts and bring down on opening balance (Appendix 2)
c) Trial balance as at 30th September 2019 (Appendix 3)
d) Prepare an income statement for the period ended 30th September (Appendix 4)
e) Statement of financial position as at 30th September 2019 (Appendix 5)
PART B
i) Ratios for James
James ratios
Competitors' aver-
age
Net profit margin 15% 28%
Gross profit margin 60% 65%
Current ratio 16.12X 2.1X
Acid test ratio 15.18X 1.5X
Accounts receivable collection
period 60.83 or 61 days 47 days
Accounts payable payment period 243 days 65 days
ii) Analysis of performance
On the basis of calculated ratios of James plc, this can be find out that there is huge
variation between this company and its competitors performance. In accordance of computed net
profit margin ratio, it can be find out that James plc is able to generate 15% margin from its
operations. While its competitors are generating 28% net margin after deducting all expenses. It
is indicating that company's performance is weaker in terms of net profit margin.
In the aspect of gross profit margin of James plc, it can be assessed that their ratio is of
60% which is 5% lesser to competitors' ratio. This is not a huge difference and it can be covered
by reducing cost of sales.
The current ratio of James plc is of 16.12:1 times and competitors' ratio is of 2:1 times.
Here is a huge difference which is indicating that James plc should make focus on minimising its
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current liabilities so that their current ratio may reach its ideal form which is of 2:1. The
company is needed to reduce their ratio by 14.02 times so that their liquidity position may
increase.
In accordance of acid test ratio of James plc, it can be find out that it is of 15.18 times and
competitors' ratio is of 1.5:1. Similar as the above current ratio, this ratio is too higher in
compare to competitor. The receivable period is higher of James as 61 days and payable days is
counted as 243 days that states that comparative to competitors it gets payment form debtors
within 61 days and pay its creditors in 243 days.
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