Recording Business Transaction

This document discusses the importance of accounting information for decision-makers, the pros and cons of accounting, and practical tasks involved in recording business transactions. It also includes a case study on the impact of COVID-19 on an income statement.

Recording Business Transaction

Table of Contents
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
PART 2............................................................................................................................................5
PART 3............................................................................................................................................7
PART 4..........................................................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCE.................................................................................................................................13

INTRODUCTION
Accounting alludes to a series or array of practices that involves tracking, assessment,
review and summarizing data of financial activity of an entity within business segment and that's
only carrying out with aid of accounting. Practically, accounting is indeed systematic language
of business and related activities. That allows the corporation to transform the current operations
into meaningful statements/reports that could be categorised according to their respective use and
relevance. Such statements and accounts shall be rendered in such a manner as to assist in the
measurement of financial results together with the status of the corporation (Coate and
Mitschow, 2018). The study covers different aspects related to accounts and recording
of financial transactions. The study consists of discussion about decision makers of corporation
and to what extent they require accounting information, pros and cons of accounting as well as
practical tasks to record business transactions and prepare financial statements.
PART 1
Recognise who are decision-makers and describe their requirement/needs with regard to
accounting-information.
The decision-makers are an individual, generally in the management, who takes tough
choices that have an effect on the way the organisation works. Employee personnel who are good
decision-makers understand how to quickly solve challenges and leverage critical reasoning
skills to better resolve issues. They will easily weigh the different choices and settle on the result
that ideally serves the corporation and its personnel (Zeff and Dyckman, 2020).
Financial management includes the compilation, review and summary of all financial
details in the way that could be utilized in reporting. Such kinds of reports, which provide
financial statistics, are helpful for drawing up an appropriate financial and budgetary plan and
policy. Through this organisation will be able to cope with their performance in near future. As
well as being able to deliver better customer offerings to end customers. All the tasks, beginning
from induction to shooting, include the assessment of the revenues target, the preparation of
advertising events along with their budgeting, as well as option of various strategies and
applications for conducting different tasks and operations. And both of these decisions are made
by top executives and corporate managers.
Decision makers are mainly top management personnel within company like in Tesco
which multinational UK based retailer has Board of directors which prime decision makers of

company. Company have Board of Directors with varying perceptions, insights and opinions
supports the members of the Community by improved corporate results. Our Board consists
of Chairman, Senior Independent Director, Group's Chief Executive Officer, Chief Financial
Officer, and number of independent non-executive directors. Tesco’s Board consists of:
 Jhon Allan Non-executive Chairman
 Ken Murphy Group Chief Executive
 Alan Stewart CFO
 Stewart Gilliland Independent Non-executive Director.
 Byron Grote Independent Non-executive Director.
 Alison Platt Independent Non-executive Director.
 Mikael Olsson Independent Non-executive Director.
 Steve Golsby Independent Non-executive Director.
 Simon Patterson Independent Non-executive Director.
They require accounting information about cost of revenue, performance and liquidity of
the corporation for strategy, monitoring and making decisions. Decision makers is involved in
evaluating the potential of the group to make money in the potential. It is accountable for
determining the liquidity of the organisation and fulfilling its financial commitments on
schedule. By the different proportions like Debts – Equity Proportion, Current Ratio etc. They
need accounting information to understand shorter-term or longer-term solvency of company.
Likewise, the imperative for shorter-term and longer-term funds could be identified with aid
of Cash Flows Statements.
Financial accounts/statements reflect all accounting transactions relating to the business
in a nutshell that allows it feasible and convenient for the executive team, alongside
corporate managers, to use this knowledge in the implementation of strategies. In which the
financial statements are drawn out on the grounds of common standards and procedures
that are same across the sector. This allows them to distinguish themselves from other rivals for
positioning around industry benchmarks. It establishes a framework for management/BOD to
take decisions on the capital budgeting, including whether such decisions are desirable and
commercially viable for the organisation to take. Furthermore, forecasts and predictions are both
based on financial information within the organisation and on change as per business conditions.

This is important not just in respect of comparative analysis, but also in respect of the framework
for collecting valuable knowledge through non-financial details.
Merits and demerits of accounting within a business unit:
Advantages:
Performance Comparison
It makes it possible to equate the financial reports of one period with others. Management should
also evaluate the structured reporting of all fiscal and accounting transactions in compliance with
the requirements of the company (Ionescu, 2017).
Decision-making
Decisions are made easier for managers because there is a thorough accounting of finance
transactions. Financial statements allow management to schedule its potential plans, schedule
and organise operations in separate organisations. Which offers facts on cash inflows and
outflows along with sales and expenditures that render it easier to foresee deficit or
surplus within the funds that ought to be handled in timely manner. This also helps to develop
clarity and oversight for the prevention and identification of fraud.
Disadvantage:
Describes information on the accounting in monetary terms
Non-fiscal transactions cannot have an impact on the statements of accounts. Only operations
of financial type may be assessed by accountant. Evidently, financial events are represented in
monetary terms. As a consequence, it provides an imperfect image during the implementation of
policy and the taking of crucial business decisions. In the sense of a tow corporation, the
company directors cannot on grounds of accounting books, take decisions pertaining to other
considerations such as economic, social and other considerations.
Accounting information could be subject to biasness
Accounting personnel have a personal impact over the corporation's accounting records. The
accounting officer may use various metrics of inventory assessment, depreciation techniques,
classification of revenues and capital spending, etc to assess the corporation's income (Hsieh, Ma
and Novoselov, 2018).
PART 2
A. Journal Entries of David for the month February 2020

Journal Entries
Date Details DT (£) CT (£)
01/02/20 Asma Ltd. A/c … Dr. 350
To office Fixtures A/c
(Being office fixtures returns to Asma
Ltd.)
350
04/02/20 Bad debt A/c...........Dr. 85
To S. Keyes 85
(Being bad debts written off from S.
Keyes)
09/02/20 Machinery A/c …......Dr. 2300
To TS Co. A/c 2100
To bank A/c 200
(Being Purchased a machine through TS
Co. to be used by the firm. The overall
purchase value of machine is £2,300. The
owner paid only 200 in form of a
cheque and the remainder of purchase
value will continue as credit)
13/02/20 Bank A/c …........Dr. 220
Bad Debt A/c..........Dr. 50
To S. Hill A/c 270
(Being £220 received from debtor S. Hill
and remaining 50 has been bad debt due
to bankruptcy)
20/02/20 Drawings A/c ….........Dr. 180
To purchase A/c 180
(Being amount withdraw to purchase
goods for owner’s personal use)
26/02/20 Drawing A/c..........Dr. 85
To insurance A/c 85
(Being personal insurance premium
debited to business books not stand
corrected)
28/02/20 TS company A/c …........Dr. 1050
To bank A/c 1050
(Being half payment of machinery paid by
owner to TS company)

PART 3
A. General Ledger of Pearce & Sons
Ledgers Accounts
(Amounts in GBP)
Date Particulars Amounts Date Details Amounts
01/02/20 By bank A/c 21500
01/02/20 By office
fixture A/c
800
01/02/20 By Van A/c 2500
29/02/20 To balance c/f 47300
Total 4300 Total 4300
Bank Account
Date Particulars Amounts Date Details Amounts
03/02/20 By cash A/c 1500 01/02/20 To capital A/c 21500
04/02/20 By Van A/c 4800 02/02/20 To Loan A/c 2500
19/02/20 By Nissan
company A/c
5200 25/02/20 To cash A/c 350
28/02/20 By balance c/f 12230
Total 24350 Total 24350
Van Account
Date Particulars Amounts Date Details Amounts
01/02/20 To capital A/c 2500

04/02/20 To bank A/c 4800
08/02/20 To Nissan
company A/c
5200
29/02/20 By balance c/f 35000
Total 35000 Total 35000
Quick office Ltd Account
Date Particulars Amounts Date Details Amounts
05/02/20 By office
fixture A/c
1100
29/02/20 To balance c/f 1100
Total 1100 Total 1100
Cash Account
Date Particulars Amounts Date Details Amounts
15/02/20 By Office
Fixture A/c
70 03/02/20 To bank A/c 1500
25/02/20 By bank A/c 350
29/02/20 By balance c/f 1080
Total 1500 Total 1500
Nissan company Account
Date Particulars Amounts Date Details Amounts
08/02/20 By van A/c 5200 19/02/20 To bank A/c 5200
Total 5200 Total 5200
Office Fixture Account

Date Particulars Amounts Date Details Amounts
01/02/20 To Capital A/c 800
05/02/20 To Quick
Office Ltd A/c
1100
15/02/20 To Cash A/c 70
28/02/20 To Bank A/c 620
29/02/20 By Balance c/f 2590
Total 2590 Total 2590
Loan Account
Date Particulars Amounts Date Details Amounts
02/02/20 By Bank A/c 2500
29/02/20 By Balance
c/f
2500
Total 2500 Total 2500
B. Balance up accounts and extract trail balance as at 30 February 2019.
Trial Balance (At month ending 29/02/20)
(Amount in GBP)
Details Debit Credit
Capital account 47300
Cash account 1080
Van account 35000
Bank account 12230
Quick office Ltd. Account 1100
Office fixture account 2590

Loan account 2500
Total 50900 50900
PART 4
Drafting income statement of Airman company year ending 30th Sept 2019.
Profit and Loss Account
( For year ending 30th September 2020)
Particulars Amount Particulars Amount
Opening Stock 36000 Sales 80000
Purchases 150000 Less: Returns
Inwards
-2000 78000
Less: Returns
Outwards
-600 149400 Closing Stock 120000
Carriage Inwards 720
Gross Profit c/f 11880
Total 198000 Total 198000
Carriage Outwards 400 Gross Profit c/d 11880
Motor Expenses 1200
Rent 5000
Telephone Charges 620
Wages and Salaries 32000
Insurance 830
Office Expenses 600
Sundry Expenses 300

Net profit / (loss) -29070
Total 11880 Total 11880
Impacts of the COVID -19 pandemic on income statement.
Business Units need fiscal, social as well as political sustainability for growth and
advancement. Instability results in a decrease in the efficiency and performance of the group as
well as accruing deficits in business units such as Airman, which have been profitable for 10
years since 2009 and are facing losses in the present year. When assessing the effects of COVID-
19, organisation should recognize as COVID-19 only sales and expenditures which are
incremental in business as well as explicitly due to COVID-19. There are sales and expenditures
that could not raised or sustained if COVID-19 pandemic hadn't existed and are therefore not
likely to recur until the consequences have fully receded. The recurring revenue and costs that
may have been received or accrued independent of COVID-19 really aren't incremental. These
are not deemed to be profits or expenditures attributable to COVID and must not be listed as
such in the declaration of revenue. For instance, payroll of idle staff; Depreciation of
plants installations while production is stopped; Rental and utility charges accrued during
temporary disruptions (Brinca, Chari, Kehoe and McGrattan, 2016).
Assessing the sums of incremental revenue and expenditure specifically due to COVID-
19 would entail a decision, the degree of which will rely on the relevant evidence and conditions
and the declaration to that effect might be essential. Certain forms of revenue and spending can
be more accurately measured in relation to COVID-19. For instance: Additional hygiene and
sanitation expenses borne as part of the management or avoidance of infections; Temporary
danger payable to staff; Penalties for defaults or non-performance of certain contracts leading to
the closing of production plants; Rental compromises rendered by the lessor as direct result of
COVID-19.
This has been recognized that the operations of the airman business covid-19 will be restricted to
the first two quarters Sep 2019 to Mar 2020 due to a short amount of time among the accounting
period and the pandemic crisis. Since Mar, it was observed that every company has been faced
with too many losses in producing, distribution network and selling owing to the consequence of
lock-down in country, Airman Company is also faced with losses of income in supply chain,
together with the rise in freights inward and outwards. There is also a lack of revenue which

decreases the demand for goods on the market and the business needs to pay fixed expenses
correspondingly. As a consequence, it's been analysed that this effect on the activity and work of
the business results. As long as Airman is concerned, they may face a failure in this financial
institution that they have reported in their documents. The condition developed by Covid-19 is
special and unusual. This complex to predict how longer this pandemic will have an effect on the
commercial activity of the organization and how much it will have an effect on the economic
state of the corporation. The distinction of patterns over the last 10 years versus present years is
also not warranted. In fact, the effect of this pandemic on potential output of financial era cannot
be predicted with certainty (Alstadsæter, Jacob, Kopczuk and Telle, 2016).
CONCLUSION
From above study this has been articulated that accounting is vital aspect in business
which enable organisation to handle financial information and take business decisions.
Accounting information are mainly used by decision makers to decisions and achieve targeted
objectives of business.

REFERENCE
Books & Journal
Coate, C.J. and Mitschow, M.C., 2018. Luca Pacioli and the Role of Accounting and Business:
Early Lessons in Social Responsibility. In Research on Professional Responsibility and
Ethics in Accounting. Emerald Publishing Limited.
Zeff, S.A. and Dyckman, T.R., 2020. Accounting and Business Research: the first 50 years,
1970–2019. Accounting and Business Research, pp.1-36.
Ionescu, L., 2017. Productivity accounting and business financial performance: a review of
current evidence. Economics, Management, and Financial Markets, 12(2), pp.67-73.
Hsieh, C.C., Ma, Z. and Novoselov, K.E., 2018. Accounting conservatism, business strategy,
and ambiguity. Accounting, Organizations and Society, 30, p.1e15.
Brinca, P., Chari, V.V., Kehoe, P.J. and McGrattan, E., 2016. Accounting for business cycles.
In Handbook of Macroeconomics (Vol. 2, pp. 1013-1063). Elsevier.
Alstadsæter, A., Jacob, M., Kopczuk, W. and Telle, K., 2016. Accounting for business income in
measuring top income shares: Integrated accrual approach using individual and firm data
from Norway (No. w22888). National Bureau of Economic Research.