Recording Business Transactions: Journal Entries, Ledger Accounts, Trial Balance, Income Statement, Financial Position, Ratios, and Organizational Performance

This article covers the recording of business transactions, including journal entries, ledger accounts, trial balance, income statement, financial position, ratios, and organizational performance. It also includes a letter to Linda regarding the impact of drawings on the business.

Recording Business
Transactions

TABLE OF CONTENT
PART A...........................................................................................................................................2
a. Providing journal entries.........................................................................................................2
b) Formulating ledger accounts ..................................................................................................5
c) Preparing trial balance as at 31st October 2021....................................................................13
d) Preparing Income Statement ................................................................................................13
e) Formulation of financial position.........................................................................................14
f) Preparing letter to Linda........................................................................................................15
PART B.........................................................................................................................................16
a) Calculation of ratios..............................................................................................................16
b) Evaluation of organizational performance by comparing with competitors and assessing
impact of COVID 19 ................................................................................................................17
REFERENCES..............................................................................................................................19
1

PART A
a. Providing journal entries
2

3

4

b) Formulating ledger accounts
Bank A/c
Dr. Cr.
Date Particulars J.F Amount £ Date Particulars J.F Amount £
01/10/21 To capital 10000 04/10/21 By Computer A/c 800
05/10/21 To sales A/c 2800 04/10/21 By Printer A/c 200
21/10/21 To Rent A/c 800 24/10/21 By Laptop A/c 1700
26/10/21 By Wages A/c 820
30/10/21
By Rent of office
flat A/c 850
31/10/21
By Withdrawal
A/c 1200
31/10/21 By Balance c/d 8030
Total 13600 Total 13600
01/11/21
To opening
balance b/d 8030
Cash A/c
5

Dr. Cr.
Date Particulars J.F
Amount
£ Date Particulars J.F Amount £
01/10/21
To capital
A/c 4800 12/10/21 Repairs of printer A/c 110
23/10/21 To sales A/c 1800 31/10/21 By Balance c/d 7340
23/10/21 To sales A/c 700
31/10/21
To Rayan
A/c 150
Total 7450 Total 7450
01/11/21
To opening
balance b/d 7340
flat A/c
Dr. Cr.
Date
Particular
s J.F
Amount
£ Date Particulars J.F Amount £
01/10/21 To capital 45000
31/10/2
1 By Balance c/d 45000
Total 45000 Total 45000
01/11/21
To opening
balance b/d 45000
6

Capital A/c
Dr. Cr.
Date
Particular
s J.F
Amount
£ Date Particulars J.F Amount £
31/10/21
To Balance
c/d 71800 01/10/21 By Bank A/c 10000
01/10/21 By Cash A/c 4800
01/10/21 By flat A/c 45000
01/10/21 By car A/c 12000
Total 71800 Total 71800
01/11/21
opening balance
b/d 71800
Furniture A/c
Dr. Cr.
Date
Particular
s J.F
Amount
£ Date
Particul
ars J.F Amount £
02/10/21
To Home
Ltd A/c 5400 18/10/21
By
Home
Ltd A/c 250
31/10/21
By
Balance
c/d 5150
7

Total 5400 Total 5400
01/11/21
To opening
balance b/d 5150
Home Ltd A/c
Dr. Cr.
Date
Particular
s J.F Amount £ Date
Particular
s J.F Amount £
18/10/21
To
furniture
A/c 250 02/10/21
Furniture
A/c 5400
31/10/21
To Balance
c/d 5150
Total 5400 Total 5400
01/11/21
opening
balance b/d 5150
Laptop A/c
Dr. Cr.
Date
Particular
s J.F Amount £ Date
Particular
s J.F Amount £
24/10/21 To bank 1700 31/10/21 By 1700
8

A/c
Balance
c/d
Total 1700 Total 1700
01/11/21
To opening
balance b/d 1700
Rent of office flat A/c
Dr. Cr.
Date
Particular
s J.F
Amoun
t £ Date Particulars J.F Amount £
30/10/21
To bank
A/c 850 31/10/21 By Balance c/d 850
Total 850 Total 850
01/11/21
To opening
balance b/d 850
Computer A/c
Dr. Cr.
Date
Particular
s J.F
Amount
£ Date Particulars J.F Amount £
9

04/10/21
To bank
A/c 800
31/10/2
1 By Balance c/d 800
Total 800 Total 800
01/11/21
To opening
balance b/d 800
Printer A/c
Dr. Cr.
Date
Particular
s J.F
Amoun
t £ Date Particulars J.F Amount £
04/10/21
To bank
A/c 200 31/10/21 By Balance c/d 200
Total 200 200
01/11/21
To opening
balance b/d 200
Sales A/c
Dr. Cr.
Date
Particular
s J.F
Amount
£ Date Particulars J.F Amount £
31/10/21 To Balance 5600 05/10/2 By Bank A/c 2800
10

c/d 1
23/10/2
1 By cash A/c 1800
23/10/2
1 By Rayan A/c 300
23/10/2
1 cash A/c 700
Total 5600 Total 5600
01/11/2
1 opening balance b/d 5600
Repairs of printer A/c
Dr. Cr.
Date
Particular
s J.F
Amoun
t £ Date Particulars J.F Amount £
12/10/21 to cash A/c 110 31/10/21 By Balance c/d 110
Total 110 110
01/11/21
To opening
balance b/d 110
11

Rent A/c
Dr. Cr.
Date
Particular
s J.F
Amount
£ Date Particulars J.F Amount £
31/10/21
To Balance
c/d 800
21/10/2
1 By Bank A/c 800
Total 800 800
01/11/2
1 opening balance b/d 800
Rayan A/c
Dr. Cr.
Date
Particular
s J.F
Amount
£ Date Particulars J.F Amount £
23/10/21
To sales
A/c 300 31/10/21 cash A/c 150
31/10/21 By Balance c/d 150
Total 300 Total 300
01/11/21
To opening
balance b/d 150
Wages A/c
12

Dr. Cr.
Date
Particular
s J.F
Amount
£ Date Particulars J.F Amount £
26/10/21
To bank
A/c 820 31/10/21 By Balance c/d 820
Total 820 Total 820
01/11/21
To opening
balance b/d 820
Withdrawal A/c
Dr. Cr.
Date
Particular
s J.F
Amount
£ Date Particulars J.F Amount £
31/10/21
To bank
A/c 1200 31/10/21 By Balance c/d 1200
Total 1200 Total 1200
01/11/21
To opening
balance b/d 1200
Car A/c
Dr. Cr.
Date Particular J.F Amount £ Date Particular J.F Amount £
13

s s
01/10/21
To capital
A/c 12000 31/10/21
By
Balance
c/d 12000
Total 12000 12000
01/11/21
To opening
balance b/d 12000
14

c) Preparing trial balance as at 31st October 2021
d) Preparing Income Statement
Income statement of Anne York for the period ended on 31st October 2021 is as follows:
15

e) Formulation of financial position
Balance sheet of Anne York as at 31st October 2021 is enumerated below:
16

f) Preparing letter to Linda
To Linda
Subject: For concern regarding drawings that is impacting the business
There are various factors which are required to be taken into consideration by the organization
so that effective performance can be derived. Operating in the current business environment is
little tough for the small organization as there are several legal, etc. kinds of requirements which
re needed to be complied. In this manner it can be specified that making withdrawal from the
capital for personal use can highly affect the processing of the organization. For accomplishing
the organizational objectives it becomes essential for the business to concentrate on applying
relevant action by aiding non necessary expenses so that meeting business objective can become
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possible.
For this purpose it is advised to the business to pay attention on having accurate & reliable
action by avoiding any personal travel with usage of organizational capital. This can contribute
in meeting business objectives of gaining higher market share, positive position, etc. In order o
become successful business need to pay attention on not withdrawing drawings.
Sincerly,
PART B
a) Calculation of ratios
Profitability ratios
Particulars Formula 2021
Gross Profit 5280
Sales revenue 5600
GP ratio Gross profit / sales * 100 94%
Particulars Formula 2021
Net profit 4300
Sales revenue 5600
NP ratio Net profit / sales * 100 77%
Liquidity ratios
Particulars Formula 2021
Current assets 15840
Current liabilities 5150
Current ratio
Current assets / current
liabilities 3.08
18

Particulars Formula 2021
Current assets 15840
Inventory 320
Current liabilities 5150
Quick ratio
Current assets - (stock
)/Current liabilities 3.014
Efficiency ratios
Particulars Formula 2021
Trade Receivable 150
Sales revenue 5600
Trade Receivable days ratio
Account receivable / sales
*365 9.78= 10 days
Particulars Formula 2021
COGS 360
trade payable 5150
Trade payable days COGS/trade payable *365 25.51
b) Evaluation of organizational performance by comparing with competitors and assessing
impact of COVID 19
Ratio analysis is one of the significant h technique which is taken into consideration by
the organization for evaluating performance of the organization (Easton and et.al., 2018). There
are various types of stakeholders who pay attention on derived outcome from the stakeholders so
that accomplishing relevant, reliable, timeliness, etc so that strategic decision. The calculated
ratios provide assistance in receiving information regarding profitability, efficiency and liquidity
which contribute in making sound decision (Cai, 2021). It can be compared with competitor’s
performance so that ascertaining accurate position can become possible.
19

Gross profit ratio provides assistance in assessing insights regarding how well company
can decline cost for increasing profitability. By comparing the current outcome with the
competitors results it can be interpreted that organization is having effective ability to reduce
cost for increasing profits. It has higher outcome than ideal margin which is 20% and reflecting
strong indication of organizational performance.
Net profit ratio allows evaluating efficiency to generate revenue by making larger
amount of sales. In the given case company possessing higher net profitability than standard
bench mark of industry (Rosita, 2021). It is as well have leading position in sector as compared
to it similar organization. In addition to this, the reason behind higher net profitability margin
which is 77% for current year is greater amount of capabilities to make sales.
Current ratio is one of the metric that is used to ascertain how well enterprise is handling
short term liabilities with usage of current assets. In addition to this, the present enterprise
possessing 3.08 times assets than liabilities. It indicates strong liquidity position as compared to
competitors.
Quick ratio is helpful in assessing utilization of cash & equivalent assets to overcome
current liabilities (Palepu and et.al., 2020.). It can be articulated that quick ratio of the specified
enterprise is 3.014 times that reflecting good cash & equivalent assets than short term liabilities.
This can permit the business to lead in industry by overcoming any hurdle arising due to
unforeseen circumstances.
Trade receivable days are calculated to determine company's efficiency to collect
payments from the customers to whom good are sold on credit (Ardhi, 2021). In the current
case, company takes 10 days to obtain funds from the traders which is lesser than mentioned
figures of competitors. This is used as positive indicator of financial condition.
Trade payable days calculated for the firm is 25 days which are greater than competitors
decided duration. This is utilized to measure the credibility of organization so that smooth
functioning with company can be done to meet requirements of business. It can hamper the
ability to deal with suppliers, and other stakeholders so that improvement should be taken.
Covid 19 is adverse situation that has impact on the financial processing of the
company. The specified organization has good performance and has not got affected from it as
higher liquidity profitability & sustainability can be seen.
20

REFERENCES
Books and Journals
Ardhi, K. F., 2021. Sentiment Analysis of Smartphone Accounting Application Users. Journal
of Applied Accounting and Taxation. 6(2). pp.161-174.
Cai, C. W., 2021. Triple‐entry accounting with blockchain: How far have we come?. Accounting
& Finance. 61(1). pp.71-93.
Easton, P.D. And et.al., 2018. Financial statement analysis & valuation. Boston, MA:
Cambridge Business Publishers.
Palepu, K.G. And et.al., 2020. Business analysis and valuation: Using financial statements.
Cengage AU.
Rosita, A., 2021. Introduction Study Of Business Intelligence Hospital Medical Recording
Data. Turkish Journal of Computer and Mathematics Education (TURCOMAT). 12(11).
pp.1043-1050.
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