Recording Business Transactions: Importance and Process

Recording
Business
transactions

Table of Contents
INTRODUCTION...........................................................................................................................1
ASSESSMENT 1.............................................................................................................................1
Part 1............................................................................................................................................1
Part 2............................................................................................................................................3
Part 3............................................................................................................................................4
Part 4............................................................................................................................................7
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Business transactions can be described as an event which is measurable in monetary
terms and possess essential impacts on financial position of an enterprise. Recording of business
transactions refers to an activity of recording financial transactions of an organization. It is a
multiple step procedure in which first step involves recording of transaction incorporated in
business in relation ton funds for the purpose of examining and deciding its effect on business
(Chaplin, 2017). This report is based on assessment of business transactions of a company. It
consists description of accounting information along with its advantages and disadvantages.
Further, journal entries are prepared for recording business items. Apart from it, general ledger
and trial balance of an organization is computed. And lastly, income statement and balance sheet
of company is prepared.
ASSESSMENT 1
Part 1
A. Identification of decision makers of Unilever and explanation of its requirement for
accounting information:
Accounting information refers to a data of business transactions of an entity. It can be
described as a data which enables identification and analysis of financial information of an
organization for the purpose of generating useful report for users or decision makers.
Decision makers, here, can be explained as a persons which are authorised to take
essential decisions for effective performance of company by implementing efficient planning and
formulating adequate strategies (Hirschmeier and Yui, 2018). It leads to enhancement of
sustainability as well as probability of an enterprise in long run. In context to large companies,
such as, Unilever, there are mainly two types of decision makers, that are, internal and external.
Internal decision makers consists of people that are working in an organization and utilises
financial information of business to improvise its productivity and efficiency. Internal decision
makers consists of managers, board of directors or owners of a Unilever. Assessment of
accounting information by managers of an enterprise helps is adequate management of financial
resources of a company. It enables management team of business in evaluation of performance
of business which ensures identification and elimination of any hindrances or loopholes for
better performance in future. Along with it, analysis of financial reports enables owners of an
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organization in effective shaping of decisions regarding borrowing or investing of fund
resources of Unilever with ensures improvement in profitability of business. Apart from it,
accounting information also helps in making decisions regarding expansion or downsizing. Apart
from it, employees of an organization forms a part of its operations, although they don't
participate in process of decision making but workforce are interested in getting informed about
financial performance of company which pertains huge impact on their job security. Hence,
decisions related to stability of employees in an organization in highly based on its financial
performance.
Further, external users or decision makers of Unilever are lenders or creditors, customers,
governmental units, suppliers as well as general public. Prior to extension of credit, paying
capacity of firm is evaluated by its financial position which is showcased through information of
accounting. Creditors utilise accounting information for the purpose of evaluating ability of an
organization in context to repayment of loan (Kanodia and Sapra, 2016). Hence, information of
accounting is analysed for identifying the credit worthiness of a company. Further, government
or tax authorities use information related to accounting for the purpose of determining taxes of
Unilever. As, different types of taxes are paid by an entity in reference to various tax base or
rules. Apart from it, customers are interested in identifying capabilities of a firm. Other external
user of accounting information are investors of an enterprise. Investors of business are interested
in its prior performance as well as its potential earnings. As, financial statement of Unilever
summarizes its information in relation to financial performance of firm, business activities and
its performance.
B. Advantages as well as disadvantages of accounting:
Accounting is a procedure of recording transactions related to finance that is pertaining to
an organization (Maas Schaltegger and Crutzen, 2016). Process of accounting involves activities
of summarizing, analysing as well as reporting such financial transactions of business. It pertains
various advantages and disadvantages which are elaborated below:
Advantages:
 Indicates financial position: Accounting enables interpretation of financial position of an
organization which helps in comparison of financial performance of business along with
other similar entities. It helps in determining efficiency of an organization.
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