Recording Business Transactions

This report discusses the recording of business transactions, including journal entries and ledger accounts, for Anne's business. It also includes a trial balance, income statement, and balance sheet for the month of October 2021, as well as financial ratios and the impact of Covid-19 on profits.

Recording Business
Transactions

Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
A. Journal entries in the books of Anne (for the month of October)...........................................3
B. Ledger account (for the month of October)............................................................................4
C. Trial balance for the month ending on 31st October 2021.......................................................9
D. Income statement (for the month ending October 2021)........................................................9
E. Balance sheet (for the month of October 2021)....................................................................10
F. Describe Drawings and illustrate it to Linda.........................................................................11
PART B.........................................................................................................................................11
a) Calculate the financial ratios which are given for the Anne's business.................................11
b) What can be seen as an impact of Covid-19 on the profits of the business..........................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
The transactions which are of monetary and non-monetary nature are termed as business
transactions. These transactions are performed during the business operations and are done with
profit motive (Ivanov, 2020). These transactions are recorded in the books of accounts to
ascertain the profits/losses of the Financial year. Further reports show the recording of
transactions and how these transactions are transferred to different ledgers and those ledgers to
the final accounts to reach the final conclusion of the business transactions. In the end ratio
analysis is carry out to ascertain different aspects of business.
PART A
A. Journal entries in the books of Anne (for the month of October)
Date Particulars Debit Credit
01/10/21 Bank a/c
Cash a/c
Flat a/c
Car a/c
Capital a/c
10000
4800
45000
12000
71800
02/10/21 Purchase a/c
Home
5400
5400
04/10/21 Computer
Printer
Bank a/c
800
200
1000
05/10/21 Bank a/c
Sales a/c
2800
2800
12/10/21 Repair Expenses a/c
Cash a/c
110
110
18/10/21 Home Ltd a/c
Purchase return a/c
250
250

21/10/21 Bank a/c
Rent income
800
800
23/10/21 Cash a/c
Rayan a/c
Sales a/c
1800
300
2100
24/10/21 Laptop a/c
Bank a/c
1700
1700
26/10/21 Wages a/c
Bank a/c
820
820
30/10/21 Rent expenses
Bank a/c
850
850
31/10/21 Drawings a/c
Bank a/c
1200
1200
31/10/21 Cash a/c
Rayan a/c
150
150
B. Ledger account (for the month of October)
Bank a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
05/10/21 Sales 2800 04/10/21 Computer 800
01/10/21 Capital 10000 04/10/21 Printer 200
21/10/21 Rent income 800 24/10/21 Laptop 1700
26/10/21 Wages 820
30/10/21 Rent expense 850
31/10/21 Drawings 1200

31/10/21 Balance c/d 8030
Total 13600 Total 13600
Cash a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
01/10/21 Capital 4800 12/10/21 Repair expense 110
23/10/21 Sales 1800
23/10/21 Sales 700
31/10/21 Rayan 150 31/10/21 Balance c/d 7340
Total 7450 Total 7450
Sales a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
31/10/21 Balance c/d 5600 05/10/21 Bank 2800
23/10/21 Cash a/c 1800
23/10/21 Cash a/c 700
23/10/21 Rayan a/c 300
Total 5600 Total 5600
Capital a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
31/10/21 Balance c/d 71800 01/10/21 Bank a/c 10000
01/10/21 Cash a/c 4800

01/10/21 Flat a/c 45000
01/10/21 Car a/c 12000
Total 71800 Total 71800
Rayan a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
23/10/21 Sales a/c 300 31/10/21 Cash a/c 150
31/10/21 Balance c/d 150
Total 300 Total 300
Purchase a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
02/10/21 Home ltd. a/c 5400 18/10/21 Home Ltd. 250
31/10/21 Balance c/d 5350
Total 5400 Total 5400
Home Ltd. A/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
18/10/21 Purchase
return
250 02/10/21 Purchase a/c 5400
31/10/21 Balance c/d 5150
Total 5400 Total 5400
Flat A/c

Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
01/10/21 Capital 45000 31/10/21 Balance c/d 45000
Total 45000 Total 45000
Car a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
01/10/21 Capital 12000 31/10/21 Balance c/d 12000
Total 12000 Total 12000
Printer a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
04/10/21 Bank a/c 200 31/10/21 Balance c/d 200
Total 200 Total 200
Drawings a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
31/10/21 Bank a/c 1200 31/10/21 Balance c/d 1200
Total 1200 Total 1200
Wages a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
26/10/21 Bank a/c 820 31/10/21 Balance c/d 820

Total 820 Total 820
Laptop
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
24/10/21 Bank a/c 1700 31/10/21 Balance c/d 1700
Total 1700 Total 1700
Rent
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
30/10/21 Bank a/c 850 21/10/21 Bank a/c 800
31/10/21 Balance c/d 50
Total 850 Total 850
Repair Expenses
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
12/10/21 Cash 110 31/10/21 Balance c/d 110
Total 110 Total 110
Computer
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
04/10/21 Bank a/c 800 31/10/21 Balance c/d 800
Total 800 Total 800

C. Trial balance for the month ending on 31st October 2021
Particulars Fol Debit Credit
Bank 8030
Cash 7340
Flat 45000
Car 12000
Capital 71800
Sales 5600
Purchase 5150
Home Ltd 5150
Rent income 50
Repair expense 110
Rayan 150
Wages 820
Drawings 1200
Rent expense 850
Laptop 1700
Printer 200
Computer 800
Total 82550 82550
D. Income statement (for the month ending October 2021)
Particulars Amount Amount

Net Sales 5600
Cost of goods sold -5470
Purchases 5150
Add: Closing stock 320
Gross profit 770
Operating expenses 980
(-)Repair expenses 110
(-)Rent expenses 50
(-)Wages 820
Net income -210
E. Balance sheet (for the month of October 2021)
Assets Rs. Liabilities Rs.
Cash in hand 7340 Capital 71800
Cash at Bank 8030 Creditors 5150
Flat 45000 Drawings -1200
Computer 800 Net loss -210
Laptop 1700
Printer 200
Car 12000
Stock 320
Debtors 150
Total 75540 Total 75440

F. Describe Drawings and illustrate it to Linda.
Drawings can be explained as the money used for personal uses apart from business purposes by
owner. Separate entity concept explains it in a better way which states that the money spent by
owner for personal uses is not accountable to business accounts and would be considered as
drawings (Natalia Maslova, and CT 2018). It also explains that personal expenses shall only be
borne by the person doing it and not by the company. It is observed by organisation and
informed to Linda that in case of Anne the amount of 1200 which was paid from business
account were the drawings done by her and also her holiday trip to New York was also paid
through business bank account.
PART B
a) Calculate the financial ratios which are given for the Anne's business.
The ratios calculated are the following:
 Gross Profit Margin = (Gross Profit / Net Sales) * 100 = (770 / 5600) * 100 = 13.75%
 Net Profit Margin = (Net profit / Net Sales) * 100
= (-210 / 5600) * 100 = -3.75%
 Current Ratio = Current Assets / Current Liabilities = 15480 / 5150 = 3.01
 Acid Test ratio = (Current Assets – Stock) / Current Liabilities = (15480 – 320) / 5150 =
2.94
 Accounts Payable Payment Period = (Average Creditors / Net Purchases) * 365 =
(5150 / 5150) * 365 = 365 Days
 Accounts Receivable Collection Period = (Average Debtors / Net Sales) * 365 = (150 /
5600) *365 = 9.78 Days
From the above calculated Accounting ratios of Anne it can be seen that the business of her
is not up to the mark as the profitability ratio states that both the Gross profit and Net profit are
low. Current ratio states the short term paying capacity of a business. This ratio is also low as
compared to Anne's competitors. Account receivable period is low, the cash is quickly realised
from debtors but the account payable period is very high, it puts negative impact on the business.

b) What can be seen as an impact of Covid-19 on the profits of the business.
Due to Covid the trading operations were adversely effected, as the movement of natives was
adversely effected due to government rules and regulations. A major effects of pandemic can be
seen the final reports of the business, due to which it has suffer losses (Swanson, 2020).
Management has also taken care of the labour in the post covid stage. New unorthodox ideas to
be inculcated, so that the business can return to the profits. Once every single thing comeback to
its normalized form then the organisation will be able to get back on track and move towards
their profit motive.
CONCLUSION
It can be stated from the above mentioned report that recording business transactions to post
journal entries in the journal and then posting it to ledger and then to final accounts, with this the
management is able to notice the shortfalls in the accounts and in the business process. And
frame new strategies according to the outcomes of the last financial records. Financial statements
provide insights of the business transactions of the business and it can be examining by its
different users according to their needs

REFERENCES
Books and Journals
Natalia Maslova, C.M.A. and CTP, P., 2018. Blockchain: Disruption and opportunity. Strategic
Finance. 100(1). pp.24-29.
Ivanov, A., 2020, March. Opportunities for uniting of accounting, auditing and financial analysis
in the digital economy of Russia. In Proceedings of the III International Scientific and
Practical Conference (pp. 1-4).
Swanson, E.B., 2020. How information systems came to rule the world: Reflections on the
information systems field. The Information Society. 36(2). pp.109-123.
Jaganathan, S., 2020. Corporate Disclosures: The Origin of Financial and Business Reporting
1553-2007 AD. Taylor & Francis.
Sterley,A., 2019. Cryptoassets: Accounting for an Emerging Asset Class. The CPA
Journal. 89(6). pp.6-7.