Recording Business Transaction Project

RECORDING BUSINESS
TRANSACTION PROJECT
A1

Table of Contents
MAIN BODY...................................................................................................................................3
PART 1............................................................................................................................................3
a) Major decision makers of accounting and need of financial information...............................3
b) Advantages and Disadvantages of Recording Financial information are enumerated below 4
PART B............................................................................................................................................6
Journal Entries of David wise Business:.....................................................................................6
PART 3............................................................................................................................................7
a) Preparing Ledger accounts of Pearce & son's business:.....................................................7
b) Trial Balance as at 28 February 2020...................................................................................11
PART 4..........................................................................................................................................12
a) Income Statements of Airman Company for the year ended 30 September 2020................12
b) Possible impact of coved 19 on Airman Company's income statement of profitability
during 10 years since 2009........................................................................................................13
REFERENCES..............................................................................................................................14

MAIN BODY
PART 1
Accounting is process of recording, summarizing, and analysing all business transaction.
It provides concise summary of financial transaction over a period of time. It helps organizations
to take decision based on this information
a) Major decision makers of accounting and need of financial information
There are 3 types of users of financial information whose objective is to study the data
widely and taking decision based on these figures.
Internal Users:
Accounting provides financial information to managers that is useful for them in
decisions regarding management of company, Asda store Ltd uses these figures to manage their
internal structure of firm in various forms like assessing how management has discharge its
responsibility for protecting and managing organization's resources. They also use this
information for shaping decision regarding expansion and downsizing and when to borrow or
invest company’s resources (Garbowski and et.al., 2019.). Internal users like managers, owners,
officers, internal auditors, directors and employees. All these users are interested in the
accounting information as they come to know about the profitability of the company and with
help of this they can take major decisions relating to increasing the profitability and effective
management of the company.
External Users:
External entities use these accounting information for many purposes. These users are
divided into six categories. Creditors and investors are the most common external users among
other external users.
 Creditors and lenders: loan providing banks and companies use these financial data to
determine that the company has credit worthiness or not, the company will be able to pay
back or will declared bankrupt.
 Employees and their unions: Does The Organization like Asda Store Ltd has the ability
to provide long term employment to its workforce also the organization can increase the
pay scale of employees or not.

 Customers: consumer also keep eye on company's information to check that the firm
will survive enough to honour its warranty policies and are they providing good quality
products at fair prices.
 Trading Partner: business needs business to do business, associated trading a company
look at the information to identify that they should do particular economic activity or not.
 Government Unit: government uses company's financial data to protect interest of
stakeholders and shareholders (McCallig, Robb and Rohde, 2019). So that firm can have
fear of rules and regulation of Govt. and practice fair activities only. General Public: Public also use this information for decision- making that organization
is providing good products without harming environment.
Government/ IRS:
Govt. agencies that uses and track the tax are interested in company's financial
information. They check that the firm is paying taxes according to current tax law or not.
Government uses these data to decide the tax and these charges decide organization's
profitability.
These are various needs of financial information of company for decision makers of Asda
store Ltd.
b) Advantages and Disadvantages of Recording Financial information are enumerated below
Financial accounting is the process of recording all business transaction in form of
financial statements (Roberts, 2020.). It aims at delivering fair and accurate data to stakeholders
so proper decision can be taken and transparency can be maintained.
Advantages:
 Maintain Business Records: it records each and every monetary transaction of business
unlike human memory which has limited capacity to remember things financial
accounting can record large amount of transaction.
 Prevention and Detection of Fraud: It represents each and every transaction so true
picture of business can be revealed and it also provides time to time information to
internal management so real idea of resources can get through these data.
 Acts as legal Evidence: Financial accounting serves as legal evidence that can be used to
overcome business disputes (Muslichah and et.al., 2020.). Misunderstanding and
confusion can be avoided through these financial legal statements.