Recording Business Transactions: Importance and Impact of COVID-19 on Income Statement

RECORDING
BUSINESS
TRANSACTIONS

Table of Contents
INTRODUCTION...........................................................................................................................3
ASSESSMENT 1.............................................................................................................................3
PART 1............................................................................................................................................3
Decision makers and their need for accounting information..................................................3
Advantage and Disadvantage of recording accounting information......................................4
PART 2............................................................................................................................................4
Journal entries with narration for the David wises.................................................................4
PART 3............................................................................................................................................5
Ledger and trail balance of Pearce & sons:...........................................................................5
PART 4 ...........................................................................................................................................7
Income statement for Airman co............................................................................................7
Impact of COVID 19 on company income statement items...................................................7
ASSESSMENT 2.............................................................................................................................8
PART A...........................................................................................................................................8
Journal transaction of T- accounts..........................................................................................8
Balance the accounts and an opening balances......................................................................9
Trial balance.........................................................................................................................12
Income statement for the period 31 Oct. 2020.....................................................................13
Preparation of financial position 31 Oct. 2020.....................................................................13
PART B..........................................................................................................................................13
Ratio calculation for Linda's business..................................................................................13
Analysis of ratio analysis in comparison to it's competitors ...............................................14
CONCLUSION..............................................................................................................................15
REFERENCES .............................................................................................................................16

INTRODUCTION
A business transaction is referred to as day to day activities done in a business firm which
includes transfer of money, goods as well as services between two or more then two parties.
These transactions are measured in money and are been recorded for maintaining transparency of
the business firm. Management of sound business firm records and displays its report of financial
activities of the organisation (Prodanova and et. al., 2019).
ASSESSMENT 1
PART 1
Decision makers and their need for accounting information
Accounting plays an important role in enhancing effectiveness of a business firm. It
allows its managers and leaders to take respective decisions in various operational activities of
the business firm. Financial accounting is an element of accounting which forms basics of
operational activities of the business enterprise (Drake, Quinn and Thornock, 2017). Under
standard guidelines of accounting systems, transactions of business firms are been recorded,
summarized and then are presented in financial statements such as P&L account, balance sheet
of the company and many more. There are so many ways to prepare financial statements of
respective companies. However to provide comparative and competitive differences some
universal set of financial statements are been prepared (Dabbicco, 2018). It proves to be an
important tool for management of companies to make respective decisions by providing with
statical data in planning structure of firm. As competition plays crucial role in deciding up of
success or failures of firm's strategies and policies, financial statements provides reliable
information about facts and figures to perform better than their competitors and helps in boosting
up of net profits of an organisation.
Financial accounts displays all monetary information related to operational activities of
the workforce. Respective decision making of various firm's depends on information been
extracted from financial statements of company (Maroun, 2017). By distinctive preparation of
financial statements of a business firm, this enables firm's leaders and managers to make
effective strategies to give a string fight to company’s competitors.

Advantage and Disadvantage of recording accounting information
Accounting information refers to the data about various financial activities conducted by a
business organisation. Accounting information is used by individuals which are associated with
the organisation such as shareholders, managers and employees (Kwilinski, 2019). This data is
also accessed by individuals which are not associated with the company such as government
authorities, regulation agencies and news reporters.
Advantage of recording accounting information
1) Formulation of financial report:
Keeping detailed record of various accounting information allows corporations to formulate
precise and accurate financial reports. Such financial reports give the organisation insight about
their net earnings and overall expenditures of the company.
2) Comparing previous data: Recording financial information in a detailed and precise manner
allows corporations to compare current financial position of the company with financial situation
of past year. This helps the company evaluate their growth and effect of policy changes on
financial situation of the organization.
3) Improves decision making: Another advantage of recording accounting information is that it
helps organizations improve their decision making process by giving them detailed insight about
their current and past financial conditions.
Disadvantages of recording financial information:
1) Inability to express non-financial transactions: Recording accounting information is limited to
expressing each business transaction as the monetary value it denotes. This excludes important
information which cannot be defined by monetary terms.
2) Misuse of data: Accounting information can be easily manipulated and controlled to showcase
incorrect financial position of the company (International Labour Organisation, 2020). By
controlling such information cheaters and criminals can easily defraud the corporation.
3) Involvement Personal Bias: Records of accounting information are not protected from
personal bias, prejudiced opinions and errors of employees. This increases inaccuracy of such
records and effectiveness of decisions formed on the basis of such records.