Recording Business Transactions: Steps to Start a Business, Role of Financial Accounting, Journal Entries, General Ledger, Income Statement, and Profit Forecast

This report covers the steps to start a business, the role of financial accounting in decision-making, journal entries, general ledger, income statement, and profit forecast. It includes advice on how to start a business, the users of accounting information, and the impact of Covid-19 on profit. The report uses examples from F Polk and Maurice and Brothers to illustrate journal entries and general ledger. The income statement of B Moore is also prepared and analysed.

BA30592E Recording
Business
Transactions

Contents
ASSESSMENT 1.......................................................................................................................3
INTRODUCTION......................................................................................................................3
PART A......................................................................................................................................3
1. Give advice on how to start a business in steps.................................................................3
2. What role does financial accounting play in decision-making, and who makes the
decisions?...............................................................................................................................4
PART B......................................................................................................................................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.....................6
PART C......................................................................................................................................9
(a) Prepare the income statement...........................................................................................9
(b) Why has profit declined and climbed throughout time, and what is the profit forecast
for 2022?..............................................................................................................................10
CONCLUSION........................................................................................................................10
REFERENCES.........................................................................................................................11

ASSESSMENT 1
INTRODUCTION
A business transaction is a change in a company's financial position caused by its
economical state. Journals and ledgers are typically used to store these documents. A journal
is a book that you keep to keep track of all of your business transactions. A ledger is a book
that keeps track of your journal totals (Sarode and et. al., 2021). The beginning of a business
as a decorator is defined in this report, but due to the circumstances of debts, consultation on
the start of business is required. In addition, for the specified transactions, journal entries,
income statements, and trial balances are prepared. In this study, Marks and Spencer is used
to analyse the decision-making process.
PART A
1. Give advice on how to start a business in steps.
David Green is a sole trader who wants to start his own decorator firm. David Green
wants to create a sole proprietorship as a decorator, but he understands that he would be
completely responsible for the company's debts. He would also be in charge of some
bookkeeping responsibilities. The stages of beginning a business which should be followed is
listed below:
1. Register the business: Before launching a business, the proprietor must register the
company under government norms. It will grant the owner and firm permission to
carry out their business activity.
2. Establish a business model: In order to be successful as a decorator, he must first
establish a business structure. For example, if he wishes to manage a sole
proprietorship, he must consider the advantages and disadvantages which can incur to
the firm.
3. Develop a company strategy: After developing a good model, it is essential to
develop a business strategy that will serve as a guide to the activities he will be
participating in in every way, the budget, and the person he truly is will manage in a
subtle way.
4. Put the strategy into action: After the plan is produced, it is built according to the
strategy, and the most important element is to put it into action (Mukkamala and
Vatrapu, 2021).

5. Create a portfolio for your business: A company portfolio is more than just a
brochure. It offers a wealth of information on the company's objectives,
competencies, and initiatives. It will include information on how the projects will be
effectively completed. It also provides biographical outlines of key members of the
organisation, stressing their real-world experience, abilities, and qualifications.
6. Obtain the Necessary Equipment: After building a company strategy on what is
required, he should be provided the necessary equipment to accomplish the
decoration. He should measure the available area before purchasing the essential
instruments to ensure that everything will fit (Liu, Yuan and Yu, 2021).
7. Develop a technology roadmap: A technological roadmap is a strategic instrument
that integrates an institution's short and long-term strategic goals with technological
possibilities. It should help it in gaining a better understanding of modern technical
possibilities, determining technological goals, and establishing a timeline for
implementing innovative methods.
8. Create a social media account: The majority of clients now choose to search for
businesses online. To boost the company's online visibility, David should build a
social media profile and a website. Using social media platforms such as Facebook,
Instagram, and others can help a company stand out, particularly if it provides work
samples in the form of videos or images. Customers can also participate in social
media discussions by sharing useful information and asking questions. Using social
media will assist in getting to know customers and vice versa.
9. Build a Community Network: He should also make an effort to physically interact
with the community by participating in charitable activities that support
environmental sustainability. The company will benefit from the commitment.
Customers will appreciate the company's products and services. It serves as a point of
communication between the organisation and its clients. This will be the socially
responsible image of your organisation (Bonsón and Bednárová, 2019).
The decorator will be able to start his business in this manner, and it will be really
beneficial for David Green to establish it.

2. What role does financial accounting play in decision-making, and who makes the
decisions?
Accounting include keeping track of, recognising, interpreting, analysing, and publishing
accounting data to users. An accounting system's objective is to give financial information
about a company. The information pertains to a company's financial health and performance,
and it is intended to be used in decision-making by a variety of internal and external users.
Decision makers are managers at various levels of a firm structure who make decisions based
on accounting data and facts. Marks and Spencer is a publicly traded company on the London
Stock Exchange, with a number of decision makers in charge of the company's market
position. Acquisitions, incentives, and the purchase of long-term assets to produce goods and
services are all possibilities (Madhani, 2021). To ensure that the company's business is
rewarding in the long run, accurate information is required.
Accounting Information Users:
1. Management: There is a split between management and shareholders in huge
corporations such as Marks and Spencer. However, they must both make judgments
for the organization's benefit, taking into account investment decisions and objectives.
2. Owners: They can examine the return on investment using accounting data and
compare Marks and Spencer’s results to those of other businesses.
3. Government: To collect various forms of direct and indirect taxes, the government
need bookkeeping data from Marks and Spencer.
4. Creditors: It can analyse Marks and Spencer’s dependability and ability to repay its
loans using accounting data.
5. Investors: It should study and analyse Marks and Spencer’s financial status utilising
accounting data before investing.
Users need to know the exact status of the business in order to make decisions about how to
achieve business goals, whether compared to other organisations in the same industry or
compared to past years based on accounting data.
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 Payable
Office Fixtures
(Office fixtures bought through credit was written-off)
150
150
10/09/21 Cash
Bad Debts
M Abel
(M Abel declared bankruptcy and received the amount
in full settlement)
180
131
311
18/09/21 Machinery
Cash
Bank
Payables
(Purchased a machinery and the amount paid by
cheque, cash and on credit)
1800
100
500
1200
26/09/21 Payables
Bank
(Half of the amount due paid through cheque)
600
600
28/09/21 Insurance Expenses
Drawings
Bank
60
70
130

(Insurance expenses paid by bank but later realised that
£70 is of personal house)
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
25/08/21 Bank 430
31/08/21 Balance c/d 2260
2800 2800
1/09/21 Balance c/d 2260
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 19/08/21 Van (Mercedes Plc) 8700
28/08/21 Office Fixtures 750
31/08/21 Balance c/d 30180
49630 49630
1/9/21 Balance b/d 30180
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
1/9/21 Balance b/d 46900
Office Fixtures
Date Particulars Ref Amoun
t
Date Particulars Ref Amount
01/08/21 Capital 1200
05/08/21 Cash 1000
05/08/21 Payables 2400 31/08/21 Balance c/d 5460
15/08/21 Cash 110
28/08/21 Bank 750
5460 5460
1/9/21 Balance b/d 5460
Payables Account
Date Particulars Ref Amount Date Particulars Ref Amount
19/08/21 Cash 8700 5/08/21 Office Fixtures 2400
31/08/21 Balance c/d 2400 08/08/21 Van 8700
8700 8700
1/9/21 Balance b/d 2400
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
1/9/21 Balance b/d 12400
Capital Account
Date Particulars Ref Amount Date Particulars Ref Amount

31/08/21 Bank 70000
31/08/21 Balance c/d 70000
70000 70000
1/09/21 Balance b/d 70000
b) TRIAL BALANCE
TRIAL BALANCE
Maurice & Brothers
Debit Credit
Bank 30180
Cash 2260
Van 46900
Office Fixtures 5460
Payables 2400
Loan Payable 12400
Capital 70000
TOTAL 84800 84800
PART C
(a) Prepare the income statement.
a) Income Statement – B Moore
Particulars Amount (£)
Sales 95000
Less: Sales Returns (3500)
Net Sales 91500
Opening Stock 18000
Purchases 110000

Less: Return Outwards (720)
Add: Carriage Inwards 890
Less: Closing Stock 13000
Cost of Goods Sold 115170
Gross Loss -23670
Less: Motor Expenses 1400
Carriage Outward 500
Rent 7000
Telephone Charges 830
Wages and Salaries 14000
Insurance 1030
Office Expenses 800
Sundry Expenses 250
Operating Expenses -25810
Net Loss -49480
(b) Why has profit declined and climbed throughout time, and what is the profit forecast for
2022?
The first quarter of 2020 was one of the most tough situations in recent years for many
businesses. While most firms made solid progress in early 2020, the covid- 19 pandemic
slowed progress in most of the world's regions between March and mid-2020. Daily
operations have been disrupted, with several stores and departments completely shut down.
According to the income statement, the company had lost money. This meant that the
company's expenses outweighed its revenue (Burgoyne and et. al., 2018). However, the
organisation's sales make little money and it cannot cover its expenses. This could be due to
Covid pandemic, which has resulted in lower demand for the items and services and thus
lower the sales. The likely consequences are numerous, ranging from small effect directly
such as a business closure to relatively long and indirect impacts such as changes in the

business strategy. Understanding the impact of the organisation and financial implications is
critical for the business owners.
CONCLUSION
It is concluded from the above analysis that preparing a business strategy is most
important while starting a venture. The recording of journal entry, ledgers and income
statement depicts the financial position of the company. The net profit is being depicted in the
profit and loss account. In this report, Tesco is taken, which is listed on London stock
exchange.
REFERENCES
Books and Journals
Sarode, R.P and et. al., 2021. Blockchain for committing peer-to-peer transactions using
distributed ledger technologies. International Journal of Computational Science and
Engineering. 24(3). pp.215-227.
Mukkamala, R.R. and Vatrapu, R., 2021. DISTRIBUTED LEDGER TECHNOLOGIES
AND BLOCKCHAIN FOR FINTECH Principles and applications. The Routledge
Handbook of FinTech.
Liu, T., Yuan, Y. and Yu, Z., 2021. The service architecture of Internet of things terminal
connection based on blockchain technology. The Journal of Supercomputing. pp.1-
21.
Bonsón, E. and Bednárová, M., 2019. Blockchain and its implications for accounting and
auditing. Meditari Accountancy Research.
Madhani, P.M., 2021. Lean Six Sigma in finance and accounting services for enhancing
business performance. International Journal of Service Science, Management,
Engineering, and Technology (IJSSMET). 12(6). pp.141-165.
Burgoyne, K and et. al., 2018. Evaluation of a parent‐delivered early language enrichment
programme: Evidence from a randomised controlled trial. Journal of Child
Psychology and Psychiatry. 59(5). pp.545-555.
Johnson, C.R and et. al., 2019. Thiamin deficiency in low-and middle-income countries:
disorders, prevalences, previous interventions and current
recommendations. Nutrition and health. 25(2). pp.127-151.
Beuselinck, C and et. al., 2019. Earnings management within multinational corporations. The
Accounting Review. 94(4). pp.45-76.