Recording Business Transactions: Journal Entries, Ledgers, Financial Statements, and Ratio Analysis

This report provides an overview of recording business transactions through journal entries, ledgers, financial statements, and ratio analysis. It includes examples and calculations for each aspect of accounting, as well as a letter to Linda regarding withdrawal transactions. The report also evaluates the performance of Anne's organization through the computation of ratios such as gross and net profitability, current and quick ratios, and trade receivable and payable days.

Recording Business
Transactions

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
a) Preparing double entry system to record transaction in journal entries..................................1
b) illustrating below ledge account to get opening balance........................................................5
c) Trial balance as at 31st October 2021.....................................................................................15
d) Illustrating income statement for the period ended 31st October 2021...............................16
e) Formulating financial position as at 31st October 2021.........................................................17
f) Preparing letter for Linda......................................................................................................18
PART B.........................................................................................................................................19
a) Calculating ratios for r Anne’s organization for October 2021.............................................19
b) evaluating performance of Anne’s organization...................................................................22
CONCLUSION..............................................................................................................................23
REFERENCES..............................................................................................................................24

INTRODUCTION
Recording Business Transaction (RBT) refers to taking all the information noted regarding
business activities exerted in monetary terms. The present working scenario has become tough
which needs firm to evaluate its transactions in order to make proper decision. The current report
will shed light on formulating basic knowledge about accounting though focusing on crucial
parts. It involves recording transaction in T account, ledger, trial balance, income and financial
position statement. This will focus on having insights related to calculations of crucial ratios in
order analyze organizational performance.
PART A
a) Preparing double entry system to record transaction in journal entries
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b) illustrating below ledge account to get opening balance
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c) Trial balance as at 31st October 2021
Particular Debit
£
Credit
£
Bank A/c 8030
Cash A/c 7340
Flat A/c 45000
Capital A/c 71800
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Purchase A/c 5150
Purchase Return A/c 250
Home Ltd A/c 5150
Rent of office flat A/c 850
Computer A/c 2500
Printer A/c 200
Sales A/c 5600
Repairs of printer A/c 110
Rent A/c 800
Rayan A/c 150
Wages A/c 820
Withdrawal A/c 1200
car A/c 12000
Total 83350 83350
d) Illustrating income statement for the period ended 31st October 2021
Income statement Amount
£
Amount £
Sales A/c 5600
Add: opening stock
Add: purchase 5400
Less: purchase return 250
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Less: closing stock 320 4830
Gross profit 770
Add: rent received 800
1570
Less: Indirect expenses
Rent of office flat A/c 850
Repairs of printer A/c 110
Wages A/c 820 1780
Net loss 210
e) Formulating financial position as at 31st October 2021
Particulars Amount £ Amount £
Non-current assets
flat A/c 45000
Computer A/c 2500
Printer A/c 200
car A/c 12000 59700
Current assets
Bank A/c 8030
Cash A/c 7340
Rayan A/c 150
Closing stock 320 15840
Less: Current liability
Home Ltd A/c 5150
Non-Current liability 0
Net assets 70390
Owners equity
Capital A/c 71800
Withdrawal -1200
Net loss -210
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Total liabilities and equity 70390
f) Preparing letter for Linda
To Linda
Subject: issue of withdrawal transaction for personal holiday.
There are number of components which is helpful in making organization move towards
success. It is important for the company to focus on several aspects that can build it strong via
proper management through identifying the significant and non-essential aspect. This involves
paying attention on assessing the major concern that is hampering the overall outcome of
enterprise. On the basis of computed details, it can be identified that the major issue which Is
affecting the business performance result is consumption of organizational fund of irrelevant
aspect (Zhang, 2022). The way of conducting the operational activities of firm is inefficient as
the end outcome that can be achieved by business is negative. It is reflecting that firm is not
functioning properly which needs it to make changes in its overall functioning.
From the determination of financial statements such as income & financial position it can be
identified that firm has not make right selection of activities for conducting the operational k
functioning. In addition to this, there are several expenses which need to be analyzed as the end
outcome of the company is not as per the expectations. There is need to eliminate such expenses
which is hampering and not productive for the overall functioning of business. Identification of
source that is leading to impact adversely is ineffective implementation of withdrawal practices
for persona expenditure in order to become successful it is highly important for the company to
give emphasis on ignoring expenditure of such activities that affect productiveness.
There is requirement to concentrate on having such aspect which can incline the productiveness
of business in turn achieving competitive benefits can become possible. In the current business
scenario there is need to make proper implementation of aspects by avoiding expenses that does
not concern operational activities (Rustagi, 2021). On the basis of conducted evaluation, it can
be recognized that there is need to focus on having appropriate ability to meet objective of
enterprise such as higher profitability, low debts, significant optimization of resources, etc. it is
essential for the company to highlight this accomplishment of goals to attract investors for
successful practicing of company. On the basis of this, it can be recognized that particular
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owner should concentrate on paying off withdrawal fund of holiday to company so that better
results can be derived. the reasons for unsuccessful presentation of financial performance of
business is improper allocation of fund and management. For improving financial condition
much emphasis should be provided on having higher productive utilization of resources.
PART B
a) Calculating ratios for r Anne’s organization for October 2021
For the current case, much focus will be provided to computing ratios such as gross, net
profit, current, quick, trade receivable and payable days so that depth insights can be obtained
(Hassan and et.al., 2019).
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b) evaluating performance of Anne’s organization
There are various reasons for which evaluating organizational financial position becomes
essential. It provides assistance in gaining the insights about the performance traits such as
profitability, Liquidity and Effectualness in managing overall operational activities
Anne's organization performance can be estimated by looking at computed figures of gross and
net profitability (PURI and SINGH, 2021). Gross and net profitability of business aids in
analyzing ability of company to generate revenue by maintaining profitability margin through
declining cost of goods sold. Gross profit margin helps in estimating how firm is producing
revenue with help of decreasing cost of goods sold. Net profit provides assistance in achieving
information related with margin which allows to get the information of ability of generating
revenue to increase profitability. There are several stakeholders who pay attention on these ratios
such as investors, lenders, suppliers, etc so that particular decision regarding investment can be
made
From the comparison of company it can be specified that firm is possessing higher outcome in
gross and net profitability as the performance of enterprise is 94 and 77% respectively. On the
basis of comparison, it can be assessed that similar organization operating in sector is possessing
lower ability as compared to Anne's performance.
In addition to this, current and quick ratios are considered to be those aspects which
helps in ascertaining how effectively it can pay attention on overcoming the prevailing short
term debts: Current ratio aids in assessing how firm is making operational practices effective
with utilization of cash equivalent assets to overcome short term liabilities: From the assessment
of given details regarding competitors average of current ratios it can be identified that similar
firm had less time assets as compared to its short term liabilities. It can be identified that Anne's
firm is having higher current ratio when compared to other organization's performance. It is
indicator of lower performance that organization is required to make changes so that higher
effectiveness can be maintained (Arslan, 2021). Quick ratio is indicating that business is having
less effectiveness aa there is greater outcome when compared to competitors. It should be
equivalent to 1 times so that proper ability to coordinate with prevailing circumstances can
become possible.
Trade receivable for the Anne's business is it can be identified that the firm takes 10 days
to obtain get funds from traders. Competitors average presented for the three years such as
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2019, 2020 and 2021 it can be identified that Anne's business is having greater effectiveness in
dealing with collecting payments. On the other side, trade payable is helpful in assessing
particular firm’s ability to overcome payments to suppliers. It play role of measuring credibility
in market through assessing trade payables for ascertaining how effectively an organizations
paying off debts. The derived outcome is 25.5 days which is higher than average shown by
competitors that needs some alterations to achieve competitive advantage. O the basis of this it
can be recognized that Anne's business performance is good but need to make modifications in
business processing so that higher profitability & sustainability to achieve economies of scale.
Covid 19 is one of the negative situation so that it which needs to be evaluated fir having
depth understanding about organization’s performance, it has not impacted Anne's business as
the results of firm is higher than competitors given performance. On the basis of this it can be
recognized that Anne's business is functioning effectively to achieve the organizational
objectives such as higher profitability & stability.
CONCLUSION
From the above report it can be b concluded that recording business transaction aids in
achieving capabilities to make strategic decision. The present report has focused on articulating
crucial statements that can lead to make significant decision. The current study has involved
journal entries, ledge account, trail balance, income and balance sheet. It has helped to evaluate
that there are several lacking factors which are needed to be improved for improving the overall
performance of company. In addition to this, current study has involved computation of ratios
for analyzing profit margin, liquidity position and effectiveness to cope up with business
changings scenarios. This has been recognized that is need to make improvement in several
factor to achieve the success.
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REFERENCES
Books and Journals
Arslan, Ö., 2021. Modern Approaches, Recording Methods, and International Regulations on
Public Accounting. In Contemporary Issues in Public Sector Accounting and Auditing.
Emerald Publishing Limited.
Hassan, M. K. and et.al., 2019. A survey on Islamic Finance and accounting standards. Borsa
Istanbul Review. 19. pp.S1-S13.
PURI, N. and SINGH, H., 2021. Current Trends in Finance in the Context of Adoption of
Principle-Based Accounting Standards in Accounting Education. Financial Intelligence in
Human Resources Management: New Directions and Applications for Industry 4.0.
Zhang, X., 2022. The Future of Cross-Border Debt Finance in China: Conclusions. In Law and
Practice of Debt Finance in Modern China (pp. 233-238). Springer, Singapore.
Rustagi, R.P., 2021. Investment Analysis & Portfolio Management. Sultan Chand & Sons.
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