Recording Business Transactions: Journal Entry, Ledger, Trial Balance, Income Statement, Balance Sheet

This study focuses on recording financial transactions of a business, including journal entry, ledger, trial balance, income statement, and balance sheet. It also includes calculating ratios and analyzing the impact of the pandemic on businesses. The study concludes with recommendations for businesses to cope up with uncertainties. Subject: Accounting, Course Code: ACC101, College/University: Not mentioned

Recording Business
Transactions

Table of Contents
Introduction......................................................................................................................................3
Assessment 2....................................................................................................................................3
b).LEDGER OF FOR October,2021...........................................................................................5
c).Trial balance as at 31 October, 2021.......................................................................................9
d).Income Statement of B Moore. for the year ..........................................................................9
e). Balance Sheet.......................................................................................................................10
f).This is a brief letter to Linda explaining her query concerning her holiday.........................12
Part 2..............................................................................................................................................12
a)Calculating Ratios:.................................................................................................................12
b) In this study is conducted to see the impact of pandemic on the businesses. ......................13
Conclusion.....................................................................................................................................14
References :....................................................................................................................................15

Introduction
In this study financial transactions of the business are recorded to keep a view on how the
organization is doing. In this all the monetary transactions of the business are recorded firstly in
journal then these are classified in ledger accounts and later summarised in the profit and loss
account and balance sheet. These statements help the management in taking all the important
decisions of the business concern and effectively utilized all the available resources in order to
make profits. Here, in this Anne York is a sole trader of the concern engaged in the business of
furniture. So, maintaining the records will help Anne to make best decisions for its concern.
Assessment 2
a) Journal entry of Anne's business
as on 31 October, 2021
Date Details Fol DT
£
CT
£
01/10/21 Bank
Cash
Flat
Car
To Capital
10000
4800
45000
12000
71800
02/10/21 Purchases 5400
5400
To Payables
04/10/21 Computer
Printer
To bank
800
200
1000
05/10/21 Bank a/c
To sales
2800
2800

12/10/21 Repair expense
To cash
110
110
18/10/21 Payables
To Purchases Return
250
250
21/10/21 Bank
Rent Received
800
800
23/10/21 Cash
Account Receivable
To sales
1800
300
2100
23/10/21 Cash
To sales
700
700
24/10/21 Computer
To bank
1700
1700
26/10/21 Wages
To bank
820
820
30/10/21 Building rent expenses
To bank
850
850
31/10/21 Drawing
To bank
1200
1200
31/10/21 Cash
To Account Receivable
150
150
Total 89680 89680

b). LEDGER OF FOR October,2021
Capital account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
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 Payables 5400
31/10/21 Balance c/d 5400
01/11/21 Balance b/d 5400
Purchase Return Account
Date Particulars Ref Amount
(£)
Date Particulars Ref Amount
(£)
02/10/21 Payables 250
31/10/21 Balance c/d 250
01/11/21 Balance b/d 250
Home ltd account
Date Details Fol Amount
(£)
Date Details Fol Amount
(£)
02/10
/21
Purchases
Return
250 18/10/21 purchases 5400
31/10
/21
Balance c/d 5150
01/11/21 To balance b/d 5150
Account Receivable
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
Computer Account
Date Particulars Ref Amount Date Particulars Ref Amount
04/10/21 Bank 800 31/10/21 Balance c/d 2500
24/10/21 bank 1700
2500 2500
01/11/21 Balance b/d 2500
Printer account
Date Details Fol Amount
(£)
Date Details Fol Amount
(£)
04/10
/21
bank 1000 31/10/21 By balance c/d 1000
01/11
/21
To balance
b/d
1000
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 Account
Receivable
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
Purchase return
Computer
Printer
Payables
Accounts Receivable
Sales
Repair Expenses
Rent Income
Wages
Drawings
Rent
Total
8030
7340
45000
12000
5400
2500
200
150
110
800
820
1200
850
83600
71800
250
5150
5600
83600
d). Income Statement of B Moore. for the year
Details Amount
(£)
Amount (£)
Sales 5600
Less : sales return -
Net sales 5600
Less: cost of goods sold
(purchase – closing stock – Purchase return)
(5400 -320 - 250)
-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
Particulars Amount (£ )
ASSETS
Current Assets:
Stock 320
Bank 8030
Cash 7340
Bills Receivable 150
Total Current Assets 15840
Fixed Assets:
Flat 45000
Car 12000
Computer 800
Printer 200
Laptop 1700
Total Fixed Assets 59700

Total ASSETS 75540
EQUITY AND LIABILITIES:
Liabilities:
Current Liabilities:
Creditors (Home Ltd.) 5150
Equity
Capital 71800
Less: Drawings 1200
Net Loss -210
Total Liabilities and Equity 77940
f). This is a brief letter to Linda explaining her query concerning her holiday.
Dear Anne,
This is an explanation regarding why holiday expenses are treated as drawings. Drawings
means expenses incur for personal purposes. These expenses are separated from the
business expense as per the business entity concept. As per this concept business is
different and individual is different. So, in case if they mention any expense in these
books it will be treated as drawing. As here, Linda booked her tickets for the holiday
purpose which will treated as her personal expense (Hemmer and Labro, 2017).
With Regards,
Finance department

Part 2
a) Calculating Ratios:
Gross profit ratio = Gross profit / Net sales*100
= 770 / 5600*100
= 13.75%
Net profit ratio = Net Profit / Net Sales * 100
= (-210 / 5600) * 100
= 3.75 %
Current ratio : Current assets / Current liabilities
This focuses on the liquidity position of the company. Whether, the company would be able to
repay its short term debts or not.
= 15840 / 5150
= 3.07
Ideal current ratio is 2 : 1, it shows company's liquidity position is good and would be able to
make short term payments on timely basis.
Quick Ratio : liquid assets / current liabilities
liquid assets = current assets – ( stock + prepaid expenses )
= ( 15840 – 320) / 5150
= 3.03
Account s payable payment period : ( Average creditors / Net purchases) * 356 days
= ( 5150 / 5150 ) * 365 days
= 365 days
Accounts receivable collection period : ( Average debtors / Net sales ) * 365 days

= (150 / 5600)* 365 days
= 9.78 days
b) In this study is conducted to see the impact of pandemic on the businesses.
As per the interpretation conducted, it has been figured out short term payment ability of
the company is good as per the trends available. This shows company would be able to make
payments on time. Earlier ratios has been 2.7 in 2019 then, 2.6 in 2020 and 3.07 in 2022 which
shows good performance of the business concern. Even company's profit ratio is good, as it is
showing company is making progress as compared to previous trends. As current gross profit
ratio is 13.5% which shows company is making progress even after the outbreak of pandemic.
And net profit margin has also increased as compared to previous years which shows growth of
3.75% from 0.02%. so, this is the current performance of business concern. As pandemic has
impacted entire economy on a massive scale such as mass unemployment, closures of the
financially weak businesses and others which has negatively impacted the growth of business.
So, the organisations have to keep themselves updated to face financial and operational
challenges while addressing the needs of the customers and suppliers. As per the competitors
gross profit average ratio it has been found Anne's business is also facing a lot of challenges and
trying to get back on track. As per the trends earlier there has been profits but now these are
having losses due to the outbreak of pandemic. Furthermore, it has impacted the payment ability
of the organisations negatively. ( Ionescu, 2017Lessambo, 2018)As of now, organisations take a
long to return their payments due to no profits. As per the data given, it has been found out that
current ratio of Anne's business is good as compared to others. Its current ratio is 3.07 times
which depicts that business is doing well and will be able to make timely payments. So,
businesses has to keep up the changes to cope up with the uncertainties. It is recommended to the
business to cut down its operational expenses to boost up its profits and capture a large market
share.

Conclusion
In the above study, financial transactions are recorded to have complete information
about how the business is performing and keep on making the changes on regular basis. It will
help the internal and external users in framing the strategies for future purpose in order to make
profits. Moreover, these help organisation to see the true and fair view of financial position and
frame corporate strategies accordingly. In this, financial tools are used to analyse these financial
statements of the business and see the growth as per the competitors. Therefore, these financial
statements are the key for future growth.

References :
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p.100953.
Ostaev, G. Y and et. al., 2019. Strategic budgeting in the accounting and management system of
agricultural enterprises. Indo American Journal of Pharmaceutical Sciences, 6(4).
pp.8180-8186.
Sorensen, D. P. and Miller, S. E., 2017. Financial accounting scandals and the reform of
corporate governance in the United States and in Italy. Corporate Governance: The
International Journal of Business in Society.
Weir, K., 2018. The purposes, promises and compromises of extinction accounting in the UK
public sector. Accounting, Auditing & Accountability Journal.