Recording Business Transactions - Desklib

This report focuses on recording, classifying and summarising the monetary transactions of the business concern. It includes steps to set up a business, decision makers in financial accounting, and analysis of income statement. The subject is BA3UK92O and the course name is Recording Business Transactions. Get solved assignments, essays, and dissertations on Desklib.

Recording Business
Transactions

Table of Contents
Introduction......................................................................................................................................3
Assessment 1....................................................................................................................................3
Give consultation on setting up the business..........................................................................3
How the financial accounting helps in decision - making and who are the decision makers?5
1. Depict the journal entries of F Polk as on 1 September.....................................................5
2. Record the General Ledger and Trial Balance of the Maurice and brothers......................7
3. Prepare income Statement and analyse why the profit has increased and decreased over the
years......................................................................................................................................10
b) Why the profit has decreased and increased over the years and what will be the estimate of
profit in 2022........................................................................................................................11
Assessment 2..................................................................................................................................11
Part A.............................................................................................................................................11
a)Journal entry of Anne's business...................................................................................11
b).LEDGER OF FOR October,2021.................................................................................14
c).Trial balance as at 31 October, 2021............................................................................18
d).Income Statement of B Moore. for the year................................................................19
e). Balance Sheet.................................................................................................................19
f).This is a brief letter to Linda explaining her query concerning her holiday.....................21
PART B..........................................................................................................................................21
a) Accounting Ratios............................................................................................................21
Analysis for Anne.................................................................................................................22
Conclusion.....................................................................................................................................22
References:.....................................................................................................................................24

Introduction
This report focuses on recording, classifying and summarising the monetary transactions of
the business concern. In this Anne York started the business of furniture in Brighton and will be
hiring financial manager to record and maintain monetary transactions in the following steps.
Firstly, these transactions will be recorded in Journal book then posted into ledger and at the last
it is summarised in financial statements. So, these financial statements will ensure that business
is performing well and consistently improving all the weak areas (DENARO, 2017). Moreover,
in this financial tools are used such as ratios which helps to compare relation between two
components as well as it helps to analyse previous profit trends. Not only this, it helps in
comparing companies of same industry and will assist them to take required actions to improve
its performance.
Assessment 1
Give consultation on setting up the business.
David Greene is the sole proprietor and is willing to start its own business as the decorator.
He knows that he is a sole proprietor and will be individually responsible for every liability and
debt of its company. He shall also be accountable and responsible for the bookkeeping duties of
it. He is not being familiar with various stages of starting up a business so there are some of the
steps which are being outlined below
 Building the business model- In order to prosper as the decorator, it is the first step which
involves setting up the business framework. For instance, if David wants to run the sole
proprietorship, he must be aware of all its drawbacks and benefits.
 Creating the business strategy- After the business model is being created it is essential to
create the plan as it will act as a guidance to its activity which are involved in everyday
business activities, budget and a person which will be liable to manage it willingly.
 Setting up the portfolio of business- In general the portfolio of the business is more than a
brochure as it contains the broad information about the competencies and goals of the
company. It includes how a project must be carried forward in a successful manner and
also includes the profile of essential people of the business together with highlighting the
real skills, professional experience and qualifications of them (Kane, 2020).

 Obtaining necessary equipment- David Green must be aware of all the necessary as well
as essential equipment which are required for the decoration after it has established the
business strategy. Prior to purchasing essential tools, David must measure the space that
is available to him so that everything can be fitted into it.
 Creation of technological road map- It is a strategic tool which comprises of combination
of long as well as short term goals of the institution with some technical options. This
will help in having an understanding of modern possibilities of technology and the goals
so that innovative process can be introduced.
 Setting up social media account- As the customers nowadays prefer the searching of the
business on online product platform so David must ensure that it creates its business
social profile as well as website so that the online visibility of the business is enhanced.
Some of the social media sites like Instagram and Facebook may help the company to
stand out from its competitor as it will help in offering the samples of work in the form of
images and videos. The customer can get involved on the platform of social media by
way of sharing some good information and also asking some of the questions (Kulikova,
Aminova and Lyzhova, 2020).
 Building the community network- David Greene must have the ability to strive in order to
connect with the community in a physical manner by way of engaging in some of the
charitable activity which promotes the sustainable environment. This is considered as a
win-win situation where the commitment shall be beneficial to a business and customers
will be able to appreciate the offering made by an organization. This also helps as a
contacting point between business as well as its customers and will make the goodwill of
the company.
Hence by the above mentioned steps David can set up it’s business as a decorator and can
grow its firm.
Advantages to David:
 If the business is well managed, then it will get huge success in the business.
 The business of decoration is at the hype in the market, it is a pro for David.
Disadvantages to David: If the venture is not managed and the cost allocation is not done
appropriately then it may suffer loss.

How the financial accounting helps in decision - making and who are the decision makers?
Accounting includes the identification, tracking, communicating, analysing as well as
interpreting the information of accounts to the users. The main goal of the accounting system
is mainly to provide the physical information about business. The data which relates to the
physical status as well as performance of the company and is also designed in order to be
used in the process of decision making by the external and internal users. The managers at
every level of business are the decision makers as they are likely to make decisions which are
mainly based on the accounting facts and data. Tesco is a large organization which is listed
on London Stock Exchange and has different decision makers who are being responsible for
maintaining the position of the company at marketplace. Accusations as well as incentives
must be considered in order to develop the product and services and the correct information
is very important so that the business can be profitable for a long time (Rathi and Given,
2017)(Rosengren, 2018). The users of the accounting information are as follows-
 Owners- They mainly review return on the investment of the business by making use
of financial information and also compare the result of it with many other
competitors.
 Management- In the big companies like Tesco, there is a separation among the
shareholders and the management but these two are likely to make a choice which is
for the benefit of the company by considering the decisions of investment as well as
initiatives.
 Creditors- They make the use of the accounting data so that the trustworthiness as
well as the ability of the Tesco company can be assessed so that their repayment can
be safeguarded.
 Investors- Before making any investment, the capitalists are required to analyse as
well as review the financial condition of Tesco by making use of the data of
bookkeeping.
 Government- It is required of the bookkeeping data so that they can collect many
types of taxes like direct or indirect (Seliverstova, 2017).
PART B
1. Depict the journal entries of F Polk as on 1 September.
JOURNAL ENTRIES – F POLK

Date Particulars Debit Credit
01/09/21 Assets A/c
Fixtures
Stock
Debtors (105 + 311)
Bank
Cash
Creditors (229 + 80)
Capital
5700
2800
5200
416
1060
85
309
14952
01/09/21 Bad Debts
P Mullen
(Bad Debts written-off)
105
105
05/09/21 Syme Ltd
Office Fixtures
(Office fixtures bought through credit was written-off)
150
150
10/09/21 Bank
Bad Debts
M Abel
(M Abel declared bankruptcy and received the amount
in full settlement)
180
131
311
18/09/21 Machinery
Cash
Bank
Brown Ltd
(Purchased a machinery and the amount paid by
cheque, cash and on credit)
1800
100
500
1200
26/09/21 Brown Ltd
Bank
(Half of the amount due paid through cheque)
600
600

28/09/21 Insurance Expenses
Drawings
Bank
(Insurance expenses paid by bank but later realised that
£70 is of personal house)
60
70
130
2. Record the General Ledger and Trial Balance of the Maurice and brothers.
a) GENERAL LEDGER – MAURICE BROTHERS
Cash Account
Date Particulars Ref Amount Date Particulars Ref Amount
03/08/21 Bank 2800 15/08/21 Office Fixtures 110
19/08/21 Toyota Co. 8700
31/08/21 Balance c/d 6440 25/08/21 Bank 430
9240 9240
Bank Account
Date Particulars Ref Amount Date Particulars Ref Amount
03/08/21 Cash 2800
01/08/21 Capital 36800 04/08/21 Van 6200
25/08/21 Cash 430 05/08/21 Office Fixtures 1000
02/08/21 Loan Payable 12400 28/08/21 Office Fixtures 750
31/08/21 Balance c/d 38880
49630 49630
Van Account
Date Particulars Ref Amount Date Particulars Ref Amount

01/08/21 Capital 32000
04/08/21 Bank 6200 31/08/21 Balance c/d 46900
08/08/21 Toyota Co. 8700
46900 46900
Office Fixtures
Date Particulars Ref Amoun
t
Date Particulars Ref Amount
01/08/21 Capital 1200
05/08/21 Bank 1000
05/08/21 Sharp Office Ltd 2400 31/08/21 Balance c/d 5460
15/08/21 Cash 110
28/08/21 Bank 750
5460 5460
Sharp Office (Creditor)
Date Particulars Ref Amoun
t
Date Particulars Ref Amount
31/08/21 Balance c/d 2400 05/08/21 Office Fixtures 2400
2400 2400
Toyota Co. Accountable
Date Particulars Ref Amount Date Particulars Ref Amount
19/08/21 Cash 8700 08/08/21 Van 8700

8700 8700
Loan Payable Account
Date Particulars Ref Amount Date Particulars Ref Amount
31/08/21 Balance c/d 12400 02/08/21 Bank 12400
12400 12400
Capital Account
Date Particulars Ref Amount Date Particulars Ref Amount
31/08/21 Office Fixtures 1200
31/08/21 Van 32000 31/08/21 Balance c/d 70000
31/08/21 Bank 36800
70000 70000
b) TRIAL BALANCE
TRIAL BALANCE
Maurice & Brothers
Debit Credit
Bank 38880
Cash 6440
Van 46900
Office Fixtures 5460
Sharp Office Ltd (Creditor) 2400
Loan Payable 12400

Capital 70000
TOTAL 91240 91240
3. Prepare income Statement and analyse why the profit has increased and decreased over the
years.
a) Income Statement – B Moore
Particulars Amount (£)
Sales 95000
Less: Sales Returns 3500
Less: Carriage Inwards 890
Net Sales 90610
Opening Stock 18000
Purchases 110000
Less: Return Outwards 720
Less: Closing Stock 13000
Net Purchases 114280
Motor Expenses 1400
Rent 7000
Telephone Charges 830
Wages and Salaries 14000
Insurance 1030
Office Expenses 800
Sundry Expenses 250

Operating Expenses 25310
TOTALS -48980
b) Why the profit has decreased and increased over the years and what will be the estimate of
profit in 2022.
For various organization, the first quarter of the year 2020 is one of the very difficult
scenario in many recent years. There are many companies which made the steady progress in its
early 2020 but the pandemic of COVID-19 has halted the progress. In different regions of the
world from March mid, there were many interruptions in the regular operations in the business
and somewhere complete shutdown of many departments in stores. In accordance with the
income statement, it can be analyzed that many businesses have suffered huge losses which
indicates that the expenses of the company has exceeded the income of it. The sales of the
company is being making very less money which cannot even cover the expenses of it as the
demand for the products has been decreased. There are different consequences which ranges
from the small effect like the closure of business to many large impact like the changes in the
strategy of the company. So it is very essential for the business owners to have the understanding
of the financial implications as well as the impact of company (Szudoczky and Karolyi, 2020).
Assessment 2
Part A
Journal books :
It is an act of recording and managing business transaction of either economic or non
economic nature. It depicts companies debit or credit balances which further helps to make
future strategies of business concern. There are five type of entries recorded in the books of
accounts such as opening entries, transfer entries, closing entries, adjusting entries and various
others. These transactions are recorded as per accounting principles and conventions in books of
accounts (Van Greuning and Bratanovic, 2020).

a)Journal entry of Anne's business
as on 31 October, 2021
Date Details Fol DT
£
CT
£
01/10/21 Bank
Cash
Flat
Car
Capital
(started business operations)
10000
4800
45000
12000
71800
02/10/21 Purchases 5400
5400
home Ltd
(purchased furniture on credit from home ltd)
04/10/21 Computer
Printer
bank
(purchased computer and printer and paid
through cheque)
800
200
1000
05/10/21 Bank a/c
sales
( sold goods and received amount in bank
account)
2800
2800
12/10/21 Repair expense
cash
(made payment for repairing printer)
110
110
18/10/21 Home Ltd
Purchases
(returned part of furniture to home ltd)
250
250

21/10/21 Bank
Rent Received
(received rent and deposited in bank )
800
800
23/10/21 Cash
Rayan
sales
(sold goods to Rayan and received amount )
1800
300
2100
23/10/21 Cash
sales
(received in cash by making sales)
700
700
24/10/21 Laptop
bank
(purchase laptop and made payment in cash)
1700
1700
26/10/21 Wages
bank
(made payment of wages)
820
820
30/10/21 Building rent expenses
bank
(rent paid of office building)
850
850
31/10/21 Drawing
To bank
(holiday expenses of owner)
1200
1200
31/10/21 Cash
Rayan
(cash received from rayan)
150
150
Total 89680 89680

b).LEDGER OF FOR October,2021
Ledger:
It is a book or collection of transactions in separate accounts. Each account has opening
or carry forward balances and then further transactions are recorded as per debit or credit
balance. Moreover, it is used to keep complete record of all transactions in books of accounts as
these are considered as master accounts. So,it is a summary statement of all the monetary
transactions relating to person, asset, expense or incomes which reflects the net effect of
transactions (Varajão, Fernandes and Silva, 2020).
Capital account
Date Details Fol Amount
£
Date Details Fol Amoun
t £
31/10/
21
To balance
c/d
71800 01/10/21 bank 10000
Cash 4800
flat 45000
car 12000
01/11/21 By balance b/d 71800
Bank account
Date Details Fol Amount
(£)
Date Details Fol Amount
(£)
01/1
0/21
capital 10000 04/10/21 computer 800
04/10/21 printer 200
05/1
0/21
sales 2800 24/10/21 laptop 1700
26/10/21 Wages 820
21/1
0/21
rent
received
800 30/10/21 rent 850
31/10/21 drawings 1200
31/10/12 By balance c/d 8030

01/1
1/21
To balance
b/d
8030
Cash account
Date Details Fol Amount
(£)
Date Details Fol Amount
(£)
01/10
/21
capital 4800 12/10/21 repair
expense
110
23/10
/21
sales 1800
23//1
0/21
sales 700 31/10/21 By balance
c/d
7340
31/10
/21
creditor
( rayan)
150
01/11
/21
To balance
b/d
7340
flat account
Dat
e
Details Fol Amount
(£)
Date Details Fol Amount
(£)
01/1
0/21
capital 45000 31/10/2
1
By balance c/d 45000
01/1
1/21
To balance
b/d
45000
Car account
Date Details Fol Amount
(£)
Date Details Fol Amount
(£)

01/1
0/21
capital 12000 31/10/21 By balance c/d 12000
01/1
1/21
To balance
b/d
12000
Purchases
Date Particulars Ref Amount
(£)
Date Particulars Ref Amount
(£)
18/10/21 Home Ltd 5400 02/10/21 Home Ltd 250
31/10/21 Balance c/d 5150
01/11/21 Balance b/d 5150
Home ltd account
Date Details Fol Amount
(£)
Date Details Fol Amount
(£)
02/10
/21
purchases 250 18/10/21 purchases 5400
31/10
/21
Balance c/d 5150
01/11/21 To balance b/d 5150
Rayan
Date Particulars Ref Amount
(£)
Date Particulars Ref Amount
(£)
23/10/21 Sales 300 31/10/21 Cash 150

31/10/21 Balance c/d 150
300 300
01/11/21 Balance b/d 150
Laptop and printer account
Date Details Fol Amount
(£)
Date Details Fol Amount
(£)
04/10
/21
bank 1000 31/10/21 By balance c/d 2700
24/10
/21
bank 1700
01/11
/21
To balance
b/d
2700
Sales account
Date Details Fol Amount
(£)
Date Details Fol Amount
(£)
31/10/
21
To
balance
c/d
5600 05/10/21 bank 2800
23/10/21 cash 1800
23/10/21 rayaan 300
23/10/21 cash 700
01/11/21 By balance b/d 5600
Expense account
Date Details Fol Amount
(£)
Date Details Fol Amount
(£)
12/10/
21
cash
(repair)
110 31/10/21 By balance c/d 2980

21/10/
21
bank ( rent ) 850
31/10/
21
bank
( drawing )
1200
01/11/
21
To balance
b/d
2980
Income a/c
Dat
e
Details Fol Amount
(£)
Date Details Fol Amount
(£)
To balance c/d 800 bank (rent
received)
800
By balance b/d 800
c).Trial balance as at 31 October, 2021
Particular Debit (£) Credit (£)
Capital
Bank
cash account
flat
Car
purchases
Laptop
Computer
Printer
home Ltd (creditor)
8030
7340
45000
12000
5150
1700
800
200
71800
5150

Raayan (debtor)
Sales
Expense
Income
Total
150
2980
83350
5600
800
83350
d).Income Statement of B Moore. for the year
Details Amount
(£)
Amount (£)
Sales 5600
Less : sales return -
Net sales 5600
Less : cost of good sold
(opening stock + purchase – closing stock)\
(5150 -320 )
-4830
Gross profit 770
Less :
Repair expenses 110
Rent expenses 50
Wages to clerks 820
Total operating expenses 980
Net profit / loss -210
e). Balance Sheet
as on 31 March, 2021

Particular note Amount (£)
Equity and liabilities:
Shareholder's fund
1. Share capital ( see note 1)
2. Reserve and surplus
Non current liabilities
 Long term borrowings
 Long term provision
Current liabilities :
 Short term borrowings
 Creditors
 Other current liabilities
Total
Assets :
Fixed assets :
 Flat
 Car
 Computer
 Printer
 Laptop
Current Assets :
 Stock
 Bank
 Cash
 Debtor (rayaan)
1 70,390
5150
75540
45000
12000
800
200
1700
320
8030
7340

total
150
75540
Note 1
share capital 71800
less : Net loss (210)
drawings (1200)
So, Share capital is 70390
f).This is a brief letter to Linda explaining her query concerning her holiday.
In this Linda holiday expenses are considered as drawings. As per business entity concept owner
and business are two different entities due to which personal transactions of owners will not be
recorded in business books. Therefore, holiday expenses to book flight and all of £1200 will be
recorded as personal expenses of owner. Due to these principles the recorded entry is drawings to
bank. These queries of Linda got resolved as per the concept of business entity which ensures
business has separate entity from its owner.
(DENARO, 2017)
PART B
a) Accounting Ratios
 Net Profit Margin = (Net profit / Net Sales) * 100
= (-210 / 5600) * 100 = -3.75%
3. Gross Profit Margin = (Gross Profit / Net Sales) * 100 = (770 / 5600) * 100 = 13.75%
4. Current Ratio = Current Assets / Current Liabilities = 15480 / 5150 = 3.01
5. Acid Test ratio = (Current Assets – Stock) / Current Liabilities = (15480 – 320) / 5150
= 2.94
6. Accounts Receivable Collection Period = (Average Debtors / Net Sales) * 365 = (150 /
5600) *365 = 9.78 Days

7. Accounts Payable Payment Period = (Average Creditors / Net Purchases) * 365 =
(5150 / 5150) * 365 = 365 Days
Analysis for Anne
It can be analysed that the enterprise of Anne is not being acting in a healthy manner as
compared to a competition. There is high working capital in the organization as compared to the
debt of short term which clearly displays that there is a powerful financial position of the
company in comparison to its rivals. So to be in the competition, the business of any is
economical. The COVID-19 pandemic have wedged seriously the dealings of the company and
also resulted in decreasing the profits. This shows the dimuniation in the net income of the
organization. It has been recommended to the business that it must be taken care of the
management of business post the pandemic phase. There must be many sided as well as new
occurrence to be adopted by companies so that it can get back to its track with some advanced
profits. When the situation is being normalised in the market, there can be improvement in the
dealings of business in the effective manner that can lead to success for business. The ratio of the
business which are being measured above clearly represents the failure of the firm. There must
be letting down of the operating expensive and after making scrutiny of the ratio of competitor,
the end profits are more powerful as compared to the firm of competitors. Moreover the gross
profit margin of any business is also less as compared to the average ratio of its competitor.
Hence it can be said that Anne must revise the business strategy of it so that it can decrease the
direct cost and bring change in its net income.
Conclusion
With respect to report, in this financial statements are prepared to ascertain financial
position of the business concern. Financial statements include profit and loss statement and
balance sheet. Income statement helps businesses to ascertain expenses and revenues of the
specific period of time. On the other hand, balance sheet showcases the financial health of
organisation. Besides this, in this report previous trends has been analysed to reach out to the
conclusion of how business is performing. Along with this, companies performance is compared
with other companies of same industry.

References:
Books and Journals:
DENARO, S., 2017. Conflict mitigation in water resources systems by informed data-driven
control and financial hedging tools.
Kane, E., 2020. Implicit and explicit norms and tools of safety net management. China Finance
Review International.
Kulikova, L., Aminova, D. and Lyzhova, A., 2020. Use of economic and mathematical modeling
tools in planning investments in fixed assets.
Rathi, D. and Given, L. M., 2017. Non-profit organizations’ use of tools and technologies for
knowledge management: a comparative study. Journal of Knowledge Management.
Rosengren, E. S., 2018. Monetary, fiscal, and financial stability policy tools: are we equipped
for the next recession?: remarks at the Tenth Conference of the International Research
Forum on Monetary Policy, Washington, DC, March 23, 2018 (No. 129).
Seliverstova, M. A., 2017. Tools and Methods of Controlling during Development and
Realization of Enterprise’s Financial Strategy. Sochi Journal of Economy, 11(4). pp.333-
340.
Szudoczky, R. and Karolyi, B., 2020. Progressive Turnover Taxes under the Prism of the State
Aid Rules: Effective Tools to Tax High Financial Capacity Or Inconsistent Tax Design
Granting Selective Advantages. Eur. St. Aid LQ, p.251.
Van Greuning, H. and Bratanovic, S. S. B., 2020. Risk Analysis: Tools and Techniques.
Varajão, J., Fernandes, G. and Silva, H., 2020. Most used project management tools and
techniques in information systems projects. Journal of Systems and Information
Technology.