Recording Business Transaction: Accounting Information and Its Impact

This report discusses the significance of recording business transactions and the role of accounting information in decision making. It covers the advantages and disadvantages of accounting and provides examples of journal entries and trial balances. Additionally, it examines the impact of COVID-19 on a company's profit and loss statement.

RECORDING
BUSINESS
TRANSACTION

Table of Contents
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
a) Explanation regarding who are decision makers and their need for information related with
accounting...................................................................................................................................3
b) Explanation of advantage & disadvantage of accounting.......................................................3
PART 2............................................................................................................................................4
Journal entries ............................................................................................................................4
PART 3............................................................................................................................................7
a) General ledger of Pearce & Sons...........................................................................................7
b) Trial balance of Pearce & Sons...............................................................................................9
PART 4............................................................................................................................................9
a) Formulation of income statement of Airman Company.........................................................9
b) impact of COVID-19 on Airman Company's Profit & Loss statement...............................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Recording business transaction is part of accounting process. This report has been
formulated in order to define how personal record, summarized business transaction by preparing
journal as well as ledger and trial balance. It also describe impact of COVID – 19 on company's
financial performance by formulating and reviewing income statement.
PART 1
a) Explanation regarding who are decision makers and their need for information related with
accounting.
Decision makers are those individual who have right to take decision and formulate
policies for business organization. In every business entity accounting information is useful for
CEO, finance manager, auditor and cost accountant of organization.
Cadbury is multinational organization which spread its market in more then of 50
countries, thus in order to maintain data cost accountant use to record business transaction. They
on the basis of evaluating statements calculated cost required for run business activities (Alkali,
Zuru and Kegudu 2018).
Finance manager use accounting information in order to evaluate financial performance
of company and measure it by performance of rival business entities. Accounting information
useful in take decision regarding which alternative is more beneficial for raise business profits.
Data collected and measure by using accounting information is also beneficial for CEO
of Cadbury on the basis of that they represent companies financials statement in front of public
as well as took decision regarding future business policies in order to attain their long term goals.
They on the basis of that take decision regarding allocation of capital source of fund
through which they can raise their cash inflow activities.
Management department of Cadbury use accounting information in such way which useful for
maintaining their business records and beneficial for allocation of business resource which help
in attaining further business goals.
b) Explanation of advantage & disadvantage of accounting.
Accounting is consider as essential branch of business. Following are its advantage &
disadvantage :
Advantages

Maintain business record: Field of accounting is developed for the purpose of easily
record business transaction in systematic formate. Manager use these record as evidence of their
business activities. These record are beneficial for the time of auditing process.
Help in forecasting: On the basis of information calculated from accounting statement,
manager able to forecast their further business earnings as well as they estimate expenses
incurred during the time of running business activities (Jasmine, 2019).
Help in decision making: Accounting ingratiation useful in process base for formulation
of managerial accounting reports. Theses reports beneficial for manager to take decision
regarding further business activities. Success of organization depend on the decision taken by
managers thus accounting play vital role in taken decision and it is mandatory for every business
entity .
Useful in calculating tax liabilities: Accounting information is used by manager for
calculate as accurate tax liability. This will be beneficial for the purpose of controlling tax
evasion related activities.
Disadvantages
Require skilled personal: For recording business transaction accurate way manager
needs to hire expertise who have knowledge regarding accounting field. It is not necessary that
information provided from accounting statement is reliable as these information totally based on
the skills of personal who record transaction and formulation financial statements.
Accounts can be manipulated: Accountant in order to make secret profit change
summery of accounts due to this business not able to recognize the accurate profit organization
generate for special period of time. Generally organization for the purpose of tax evasion
manipulated accounts and financial statements (Krismiaji, 2019).
Highly expensive for small business: For small business entities it is hard for them to
maintain accounts as they don't have sufficient capital for hire accountant.
PART 2
Journal entries

Asma Limited a/c.... 350...
To purchase return a/c 350
( Being office fixtures return to
supplier.)...
Bed debts a/c... 85...
To S. Keyes a/c.. 85...
( Being bed debts written )..
Machine a/c.... 2300...
To Bank a/c... 200...
To TS. Company a/c... 2100...
( Being machinery purchase,
2100 on credit basis and check
paid for the remaining
amount)...
Bank a/c... 220...
To bed debt recovered a/c... 220...
( Being bed debts recovered
from S.Hill)...
Bed debts a/c... 50...
To Profit and Loss a/c... 50....
( Being loss on recovery of bed
debts)....
Drawing a/c.... . 180...

Asma Limited a/c.... 350...
To stock a/c... 180...
( Being goods use for personal
purpose...)
Drawing a/c.... 85....
To bank a/c... 85....
( Being insurance premium
used for personal purpose not
recorded correctly in the
books of account)...
TS. Company a/c.... 1050...
To Bank a/c... 1050...
( Being debt amount is paid of
machinery by cheque)....

PART 3
a) General ledger of Pearce & Sons
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 5200

Date Particulars Amounts Date Details Amounts
company A/c
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

Date Particulars Amounts Date Details Amounts
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) Trial balance of Pearce & Sons.
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
a) Formulation of income statement of Airman Company.
Particular.... Amount..... Amount...
( A) Revenue... 80000...
Less: Sales return... 2000...
Ne revenue... 78000...
Closing stock.... 120000.... 198000...
Less: Cost of goods sold....
Opening stock... 36000....
Purchase ( Less purchase
return)
149400....
Carriage inward..... 720
Total cost of goods sold... 186120.....
(B) Gross profit... 11880....

c) Operating expenses...
Carriage Outwards.... 400....
Motor Expenses.... 1200...
Rent.... 5000...
Telephone Charges... 620...
Wages and Salaries... 32000....
Insurance.... 830...
Office Expenses.... 600....
Sundry Expenses... 300.... 40950....
Net loss (B- C)...... -29070...
b) impact of COVID-19 on Airman Company's Profit & Loss statement.
COVID – 19 pandemic started in end of December of 2019 from China and it spread all
over the world within a very few months. This pandemic directly impacted on monetary
performance of economy as well as business organization. Airman Company's growth rate
adversely impacted and goes down due to this pandemic as they are not able to open their
business due to lock-down policy. Which directly affect on their sales rate (Pavlopoulos, Magnis
and Iatridis, 2019).
Airman Company generate profit at higher rate before pandemic time period, however due to
thee impact of COVID – 19 the organization only able to generate 11880 gross profit. They are
not able to maintain their profits and organization face loss this year. Their value of net loss is
valued at -29070. The main reason of suffer from loss as due to the adverse impact of this
pandemic and rigid policies of government, management department not able to communicate
and deal with their customer, they need to pay salaries to their employee and on behalf of
expenses Airman company not able to sell their products in such quantity through which they
can generate revenue which help in bear all the expenses.
Due to this pandemic organization's income statement showcase negative balance even
though they able to generate gross profit however due to the high rate of operating expenses

organization's financial performance decline. Management department of Airman Company need
to formulate those policies and strategies which will help in increase their selling rate through
which they can able to maintain position of business organization within the market economy
again. Which further required for maintain sustainability of business entity in market (Xiong, H.,
Wu, Hou and Zhang, 2020).
CONCLUSION
From the above analysis it has been concluded that accounting elements play vital role in
systematically run business entities. Personal use journal, ledger and trial balance to record each
& every transaction. Which will further useful in formulating of financial statements through
which manager can analysing performance of their organization for particular period of time.

REFERENCES
Books and journals
Alkali, M., Zuru, N. and Kegudu, D., 2018. Book value, earnings, dividends, and audit quality on
the value relevance of accounting information among Nigerian listed firms. Accounting.
4(2). pp.73-82.
Jasmine, C. A., 2019. Impacts of Covid-19 on Company and Efforts to Support Organization
Adaptable. Dr. David F. Rico, PMP, ACP, CSM. pp.67-70.
Krismiaji, K., 2019. Boards’ Characteristics, Voluntary Disclosure, and Accounting Information
Value Relevance–Indonesian Evidence. Jurnal Akuntansi dan Bisnis.19(2). pp.240-252.
Pavlopoulos, A., Magnis, C. and Iatridis, G. E., 2019. Integrated reporting: An accounting
disclosure tool for high quality financial reporting. Research in International Business
and Finance. 49. pp.13-40.
Xiong, H., Wu, Z., Hou, F. and Zhang, J., 2020. Which firm-specific characteristics affect the
market reaction of Chinese listed companies to the COVID-19 pandemic?. Emerging
Markets Finance and Trade.56(10). pp.2231-2242.

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