Recording Business Transactions

This document provides information about the process of recording business transactions, decision makers of accounting information, advantages and disadvantages of accounting, and the impact of Covid-19 on the company's income statement. It also includes a trial balance and journal entries in the books of David Wise.

Recording Business
Transactions

TABLE OF CONTENTS
PART 1............................................................................................................................................3
(a) Decision makers of the accounting Information....................................................................3
(b) Advantages and Disadvantages of accounting.......................................................................4
PART 2............................................................................................................................................4
Preparing journal entries in the books of David Wise which occur in Feb 2020:.......................4
PART 3............................................................................................................................................6
a. Presenting general ledger of S. Keyes.....................................................................................6
Fixtures a/c.......................................................................................................................................7
b. Trial balance............................................................................................................................8
PART 4............................................................................................................................................8
a) Income statement for the year ending 30th September, 2019...................................................8
b) Impact of Covid-19 on company income statement................................................................9
REFERENCES................................................................................................................................1

PART 1
(a) Decision makers of the accounting Information
Accounting is the process of recording financial transaction related to a business which
includes Summarising, analysing, and reporting those transactions in the books of accounts.
Financial accounts provide a wealth of information to its users, there are internal and external
users of financial accounting.
Internal users are the person who are inside in the organization
 Management: These are real owner of the company who are using financial information
for decision making about their investments (B Romney 2018). In small businesses
sometimes there are management may include owners. Management of the company is
the first and foremost user of the financial statements, they are the ones who prepared the
financial statements. Employees: They have interest in the company's stability and profitability because they
want to know about their pay salaries and other employee’s benefits. They use financial
information for assess the performance of firm for their future career development.
External Users are the person who are outside the organisation.
 Customers: They need to view financial statements of the company from which they are
purchasing goods and services. Customers always uses the product by seeing products
long term availability so sometimes they use financial statements.
 Competitors: They would like to know about the financial status of the company for
maintain a competitive edge on their competitive firms (Chiu, Liu, Muehlmann and
Baldwin, A. 2019). They want to analyse the financial health of the other company so
uses this statements.
 Government: Government agencies like income tax departments, sales departments
would like to know about the earning profits of the company for keep a check on that the
company is paying taxes on time or not.
 Investors: These are the person who have interest in the company and they invest the
money in the business by analysing company’s financial performance and position.

(b) Advantages and Disadvantages of accounting
Advantages of accounting
Helps in Decision making: Accounting helps in taking decision about financial position
and performance of a business. accounting information enables management to plan its future
activities, and helps in making budget.
Preparation of financial statements: Financial statements includes income statements,
balance sheets, cash flow statements are prepared easily if the proper recording of transaction is
done. these statements show true and correct financial position of a company.
Maintenance of business records: if recording of every transaction is done in journals
then it will show as records. f proper recording is done then financial statements also serve as an
evidence in court.
Disadvantages of accounting
Considered monetary Transactions: Financial accounting only considered monetary
transaction if any transaction who does not measurable in monetary terms then its impact is zero
in accounting.
Manipulation of accounts is possible: the accountant and mangers can manipulate or
misinterpret accounting profit which results in increase in frauds and scams in business
organisations.
Fixed Assets recorded at original cost only: There can be a difference between the
market value or book value of assets. Accounting only considered original cost of the asset not
market value so it sometimes balance sheet does not show true financial position.
PART 2
Preparing journal entries in the books of David Wise which occur in Feb 2020:
DATE PARTICULARS DEBIT £
CREDIT
£
01/02/2020 Asma Limited account dr. 350
To Office Fixtures account 350

(Being office fixtures returned to the
supplier)
04/02/2020 Bad debts account dr. 85
To S. Keynes account 85
(Being the amount due from S. Keynes
registered as bad debts)
09/02/2020 Machinery account dr. 2300
To Bank account 200
To TS Co. Account 2100
(Being machinery purchased partly by
issuing cheque and partly on credit)
13/02/2020 Cash account dr. 220
Bad debts account dr. 50
To S. Hill account 270
(Being S. Hill account fully settled partly in
cash and partly registered as bad debts)
20/02/2020 Drawings account dr. 180
To Stock account 180
(Being goods withdrawn for personal use)
26/02/2020 Insurance account dr. 85
To Cash account 85
(Being wrongly debited as expense account
in the previous month now reversed)
28/02/2020 TS. CO. Account dr. 1050

To Bank account 1050
(Being half of the amount paid to TS CO.)
PART 3
a. Presenting general ledger of S. Keyes
Ledgers for the month of Feb 2020 is enumerated below:
Capital a/c
Date Particulars JF Amount Date Particulars JF Amount
28/02/20 To balance c/d 47300 01/02/20 By Bank account 21500
01/02/20 By Van account 25000
01/02/20 By Office Fixture account 800
Bank a/c
Date Particulars JF Amount Date Particulars JF Amount
01/02/2020 To Capital account 21500 03/02/2020 By Cash account 1500
25/02/2020 To Cash account 350 04/02/2020 By Van account 4800
19/02/2020 By Nissan Co. Account 5200
28/02/2020 By Office Fixture account 620
28/02/2020 By balance c/d 9730
Van a/c
Date Particulars JF Amount Date Particulars JF Amount
01/02/2020 To Capital account 25000 28/02/2020 By balance c/d 35000
04/02/2020 To Bank account 4800
08/02/2020 To Nissan Co. Account 5200
Fixtures a/c
Date Particulars JF Amount Date Particulars JF Amount

01/02/2020 To Capital account 800 28/02/2020 By balance c/d 2590
05/02/2020 To Quick office limited account 1100
15/02/2020 To Cash account 70
28/02/2020 To Bank account 620
Lloyds a/c
Date Particulars JF Amount Date Particulars JF Amount
28/02/20 To balance c/d 2500 02/02/20 By Cash account 2500
Quick office a/c
Date Particulars JF Amount Date Particulars JF Amount
28/02/20 To balance c/d 1100 05/02/20 By Office Fixture account 1100
Nissan Co.
Date Particulars JF Amount Date Particulars JF Amount
19/02/20 To Bank account 5200 08/02/20 By Van account 5200
Cash a/c
Date Particulars JF Amount Date Particulars JF Amoun
02/02/20 To Lloyd's bank account 2500 15/02/20
By Office Fixture
account 70
03/02/20 To Bank account 1500 25/02/20 By Bank account 350
28/02/20 By balance c/d 3580
b. Trial balance
Trial balance

PARTICULARS DEBIT £
CREDIT
£
Capital 47300
Bank 9730
Van 35000
Office Fixtures 2590
Lloyd's Bank 2500
Quick office limited 1100
Cash in hand 3580
Total 50900 50900
PART 4
a) Income statement for the year ending 30th September, 2019
PARTICULARS £ £
Sales 80000 78000
Less Sales Return -2000
Opening Stock 36000
Add Purchase 150000
Less Purchase Return -600
Less Closing Stock -120000
Cost of goods sold 65400
Carriage Inward 720
Gross profit for the year 11880
Carriage Outward 400
Motor Expenses 1200
Rent 5000

Telephone Charges 620
Wages and Salaries 32000
Insurance 830
Office Expenses 600
Sundry Expenses 300
Net loss for the year -29070
b) Impact of Covid-19 on company income statement
Through the use of PESTLE analysis, the actual impact of Covid-19 in regard to the
income statement of the company can determined, evaluated and analysed easily. There are
various different factors which are required to be taken into consideration as all these factors
have some or the other impact over the function of the business operation. The first important
factor is the political factor, as per this the slow response of the government in respect to tackling
with the emergence of the global pandemic of Covid-19 has resulted into highly impacting the
business functioning and operations (Bartik and et.al., 2020). This has consequently led to the
widespread political dissatisfaction and disagreement among the citizens. Alongside that, there is
change in the exchange too, which has made nations understood the reliance of supply chain
network on others. Subsequently, inventory network has been hampered which caused decrease
in the business. In regard to the economic factors, the outbreak of the Covid-19 has caused poor
and decline in the market performance all across the globe. This has come about into making
speculators or the investors taking back their money from the monetary instruments to secure
themselves for the market unpredictability. In addition to this, as more and more works and
employees are falling ill, this has disrupted the smooth flow of business and affected the business
due to the lack of workers.
In regard to the social factors, Covid-19 has led to the creation of panic and fear in the
mind of the people at various level. This has on a large scale affected the complete supply chain
as the individuals and the nation as a whole are taking preventive measures for keeping them
safe. On account of the technological aspect, Covid-19 has come about into headway in the
virology giving significant data to the researchers. This will furnish world with the numerous
news approaches to deal with such pandemic. Next is the legal factor, the organizations and the

people are currently needed to keep the laws and principles set by the public authority under such
circumstance and rebelliousness of it will prompt inconvenience or punishment (Fairlie, 2020).
This factor has a huge impact over effectively and efficiently carrying out the business activities.
The last factor is environmental factor, the emergence of Covid-19 has caused travelling fear and
work from home or remote working condition which has come about into decrease in the
environmental pollution which is considered good for the people and the planet but on the other
hand, this has resulted into decline in the movement of people from one place to other. Hence, in
this way Covid-19 has affected the business as each of these factors ahs some influence or
impact over the items of income statement specially the revenue and cost. Coronavirus has
caused decline in revenue but the organizations were still required to meet with its fixed
expenses which cannot be ignored and thus, this has led to incurring losses for the businesses.

REFERENCES
Books and Journals
B Romney, M., 2018. Accounting information systems. Pearson Education Limited.
Bartik, A. W. and et.al., 2020. The impact of COVID-19 on small business outcomes and
expectations. Proceedings of the National Academy of Sciences. 117(30). pp.17656-
17666.
Chiu, V., Liu, Q., Muehlmann, B. and Baldwin, A. A., 2019. A bibliometric analysis of
accounting information systems journals and their emerging technologies
contributions. International Journal of Accounting Information Systems. 32 . pp.24-43.
Fairlie, R. W., 2020. The impact of COVID-19 on small business owners: Continued losses and
the partial rebound in May 2020 (No. w27462). National Bureau of Economic
Research.
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