Recording Business Transactions: Steps for Starting a New Business, Identifying Decision Makers, Journal Entries, Income Statement and Graph Analysis

This article covers the steps for starting a new business as a decorator, identifying decision makers and users of financial information, journal entries, income statement and graph analysis. It includes a detailed guide on how to plan a business, assess finances, conduct market research, and promote the business. The article also explains the importance of accounting and financial information for internal and external users, and provides journal entries and a trial balance for ABC Enterprise. Additionally, it includes an income statement and graph analysis for sole trader B Moore.

RECORDING BUSINESS TRANSACTION
ASSESSMENT 1

TABLE OF CONTENTS
ASSESSMENT 1............................................................................................................................1
PART A...........................................................................................................................................1
1. Steps for starting a new business as decorator........................................................................1
2 Identifying the decision makers, users of financial information..............................................2
PART B............................................................................................................................................3
1. journal entries..........................................................................................................................3
2...................................................................................................................................................4
a. Recording transaction in ledger accounts................................................................................5
b. Trial balance of ABC Enterprise as at 31 August 2021..........................................................7
PART C............................................................................................................................................7
a)..................................................................................................................................................7
b).................................................................................................................................................8
REFERENCES..............................................................................................................................10

ASSESSMENT 1
PART A
1. Steps for starting a new business as decorator
 The very first step for any type of business is to choosing a right business model. This
can be done through making proper business plan or model. This includes what range of
services will the businessman offer and what types of customer’s company will target.
 Planning about business is the most important and first step for new start up, because a
clear plan can map out the specifics of business (Baskara and et.al., 2019). It will include
cost of products or services, target market and necessary expenditure needs to be noted in
to books of planning.
 Assessing business finances is important such as writing down need of materials,
employees, workers and equipment’s, machinery and other cost. It is suggested to take
advice from expertise or professionals who knows about finance. Ensure they will help to
determine legal business structure.
 To run smooth business, it is important that people must adapt to changing situations of
market. so, conducting in depth market research is important step. It is the most critical
part of business plan, as it allows business to demonstrate knowledge and skills of the
industry. It will include size of market, opportunity and overview of services and how
business will achieve goals.
 After that it is necessary to conduct market research, it will tell if there is an opportunity
to turn business idea into a successful business (Rosa, Sukoharsono and Saraswati,
2019). Market research will give a brief idea about market trends, customer preferences
and demand of goods.
 Choosing business name is the another step, because it is sole trader business firstly it is
important to prepare documents which is required for starting new business. Documents
such as KYC, bank account details because all the business transactions will be through
bank account information.
 Though no specific registration is required for sole trader business, certain basic
registration is required such as it is important to register under the business establishment
act and small and medium enterprise.
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 Start-up capital for setting up business can come from different means such as loans,
investors, crowdfunding and others. The best way to acquire funding for business is to do
arrange campaigns. This will increase the chances of attracting more new customers,
ultimately it improves the reputation of company, build awareness about brand. With the
help of campaigns, company can raise smaller amounts of money which is beneficial for
productivity.
 After that it is important to do promotional activities in order to spread brand awareness
so, need to build up brand name with the help of social media, market campaigns,
surveys and online marketing. Use digital platforms for social networking and building a
customer base in order to make connections as a decorator.
 Deciding about the cost business will charge is the important step to consider carefully. It
is important to charge as per the market needs, because charging more than that will
create trouble landing customers at all (How to Start a business, 2022). By taking into
business account all the required costs associated with decorating events.
2 Identifying the decision makers, users of financial information
Accounting plays an important part on the business, which is beneficial for the company to
keep track on business transactions and make necessary changes when required. It is helpful to
record, analyse and summarise the business activities such as cash outflows and inflows of an
entity. With the help of accounting, company can get information about transactions which is
beneficial for decision making process.
Royal Dutch shell PLC is situated in UK, largest company trading on the London stock
exchange(LSE).
Internal users of financial information
Owners- The owners in the company can use the financial statement to evaluate whether
their investment is protected or safe (Mates and Foltean, 2021). Whether the firm is providing an
acceptable return on their investment. They make decisions to improve the business performance
in terms of productivity, profitability and cash flows and financial health.
Employees- employees are the asset for an organisation, they work effectively to improve
the performance of company. Financial information needed by the employees so that they can
work together as team to accomplish the goals or objective. They use financial information to
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evaluate a company’s business operations, to keep track on individual performance with the help
of their leaders or managers.
Management team- the team of the company is basically a department which is categorize
into different sections, such as financial department, accounting department and HR department.
Also internal users mean a members of a firm’s management who use financial details of the
firm in managing and running smooth business (Osadchy and et.al., 2018). They all work
together with each other to make important decision related to business transaction and others.
External users of financial information
External users are the people outside the company who does not directly run business
operations and uses financial information or accounting reports to make decisions of firm.
Creditors- They use the accounting and financial information and data related to business
transactions to find out the ability of the borrower to repay the loan amount, economic business
position and number of liabilities and assets.
Investors- for the company, investors are the capital providers who sees the financial
reporting for finding out the possibilities of the business in the near future, accounting and
financial information play a vital role for an investor so that they easily make decisions on
investments (Henry and Peytcheva, 2020). They go through all the data and information for
making sure that the investment is secure or safe.
Government- the financial information and data related to business is important for
government regulatory and agencies so that they can monitor the economy and keep track on the
market conditions.
PART B
1. journal entries
Journal entries for the transactions of September 2021 are enumerated below
Date Particular Debit (in
£)
Credit
(in £)
Sep 1 Bad Debt A/C
To P Mullen
(Being bad debt recorded owed by P Mullen)
105
105
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Sep 5 Syme Ltd A/C
To purchase return A/C
(being goods returned by Syme)
150
150
Sep 10 Cash a/c
Bad debt a/c
To M. Abel
(Being M. Abl declared bankrupt)
180
131
311
Sep 18 Machinery a/c
To cash
To bank
To Brown ltd
(being machinery purchased through cash, cheque and
credit)
1800
100
500
1200
Sep 26 Brown ltd a/c
To Bank a/c
(being half of debt paid by cheque)
600
600
Sep 28 Insurance A/C
Drawing a/c
To bank a/c
(being amount paid for insurance both business and
private)
60
70
130
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Journal entries for the transactions of August 2021 in the books of ABC enterprises are as
follows:
Date Particular Debit Credit
Aug 1 Bank a/c
To bank loan a/c
(being bank loan taken)
12400
12400
Aug 2 Cash a/c 2800
4

To Bank a/c
(being amount transferred in cash)
2800
Aug 3 Van a/c
To Bank a/c
(being van purchased and paid by cheque)
6200
6200
Aug 4 Office fixtures
To bank
To Sharp Office ltd
(being office fixtures purchased on cash & credit
basis)
3400
1000
2400
Aug 8 Van a/c
To Toyota Co
(Being van purchased on credit)
8700
8700
Aug 15 Office fixtures
To cash
(being office fixtures purchased on cash)
110
110
Aug 19 Toyota co
To bank
(being amount paid to Toyota by cheque)
8700
8700
Aug 25 Bank a/c
To cash
(being cash deposited in bank)
430
430
Aug 28 Office fixtures
To bank a/c
(being office fixtures purchased by cheque)
750
750
a. Recording transaction in ledger accounts
Bank a/c
Date Particulars Amount (in £) Date Particular Amount (in £)
1-Aug Bank loan 12400 2-Aug By cash 2800
25-Aug To cash 430 3-Aug By van 6200
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31-Aug To bal c/d 6620 4-Aug By office fixtures 1000
19-Aug By Toyota Co. 8700
28-Aug By office fixtures 750
Total 19450 19450
Bank loan a/c
Date Particulars Amount (in £) Date Particular Amount (in £)
31-Aug To bal c/d 12400 1-Aug By Bank 12400
12400 12400
Cash a/c
Date Particulars Amount (in £) Date Particular Amount (in £)
2-Aug to bank 2800 8-Aug by office fixtures 110
25-Aug by bank 430
31-Aug by bl c/d 2260
Total 2800 2800
Van a/c
Date Particulars Amount (in £) Date Particular Amount (in £)
3-Aug to bank 6200 31-Aug by bal c/d 14900
8-Aug to Toyota 8700
Total 14900 14900
Office fixtures a/c
Date Particulars Amount (in £) Date Particular Amount (in £)
4-Aug to bank 1000
4-Aug to sharp office 2400 31-Aug by bal c/d 4260
15-Aug to cash 110
28-Aug to bank 750
Total 4260 4260
Sharp office Ltd
Date Particulars Amount (in £) Date Particular Amount (in £)
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4-Aug by office fixtures 2400
31-Aug To bal c/d 2400
Total 2400 2400
Toyota
Date Particulars Amount (in £) Date Particular Amount (in £)
19-Aug to bank 8700 8-Aug by van 8700
8700 8700
b. Trial balance of ABC Enterprise as at 31 August 2021
Particulars
Debit side
Figures (in £)
Credit side
Figures (in £)
Bank 6620
Bank loan 12400
Cash 2260
Van 14900
Office fixtures 4260
Sharp office 2400
Total 21420 21420
PART C
a)
Income statement of sole trader B Moore. as at 30 September 2021
Particulars Figures ( in £)
Figures ( in
£)
Sales 95,000
Return inwards (Sales Returns) 3,500
91,500
COGS 114,280
Carriage inwards 890
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Gross Loss -23,670
Carriage outwards 500
Motor expenses 1,400
Rent 7,000
Telephone charges 830
Wages and salaries 14,000
Insurance 1030
Office expenses 800
Sundry expenses 250 25810
Net loss 49,480
Computation of cost of goods sold (COGS)
Particulars Figures ( in £)
Figures ( in
£)
Inventory (Stock): 30 September 2020 18,000
Purchases 110,000
less: Returns outwards (Purchase Returns) 720 109,280
Closing stock 13,000
COGS 114,280
b)
Y= 1326x + 121793
= 1326 (9) + 12793
= 11934 + 12793
= 24727
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Due to corona virus pandemic, company has to suffer lots of challenges and need to
recover its profitability in order to achieve competitive advantage. The graph shows the
comparison in income statements, in which the firm is facing loss in year 2020 and 2021. By
evaluating the graph, it has been analysed that company has bear loss and needs to focus on its
performance in the future, but there has been an increasing trend shown in the graph. Over the
period of time company has successfully working on its business operations which helped the
them to recover its market position in the year 2022. It has been also evaluated with the help
calculation that there is an increase in profit of 24727 in the year 2022. In order to avoid any
uncertainty in the future, the firm needs to focus on growing their economy, sales and work on
revenue with the help of effective marketing strategy in order to achieve productivity and
profitability.
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REFERENCES
Books and Journals
Baskara, R. and et.al., 2019. Human Capital Strategy Implementation on Duck Nugget Frozen
Food Business over Start-Up Business Plan. Journal of Multidisciplinary Academic. 3(4).
pp.91-96.
Henry, E. and Peytcheva, M., 2020. Joint effects of boilerplate and text markup on the
judgments of novice and experienced users of financial information. Behavioral Research
in Accounting. 32(1). pp.1-20.
Mates, D. and Foltean, N. I. P., 2021. Synthesis Financial Information-Between Utility And
Users In The Context Of The Covid-19 Pandemic. Annales Universitatis Apulensis: Series
Oeconomica. 23(1). pp.11-16.
Osadchy, E. A. and et.al., 2018. Financial statements of a company as an information base for
decision-making in a transforming economy.
Rosa, M. C. W., Sukoharsono, E. G. and Saraswati, E., 2019. The role of venture capital on
start-up business development in Indonesia. Muhammadiyah University Yogyakarta.
Online
How to Start a business. 2022. [Online]. Available through: <
https://www.businessnewsdaily.com/4686-how-to-start-a-business.html>
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