Recording Business Transactions - Desklib

This article discusses the importance of recording business transactions, steps to follow, and examples of journal entries and income statements. It also includes a trial balance and ledger accounts for Maurice & Brothers. The article is relevant for accounting and finance courses in colleges and universities.

Business Transactions

Table of Contents
INTRODUCTION...........................................................................................................................3
ASSESSEMENT.............................................................................................................................3
Part A..........................................................................................................................................3
Part B...........................................................................................................................................5
CONCLUSION..............................................................................................................................11
REFERNCES:................................................................................................................................12
Books and Journals:...................................................................................................................12

INTRODUCTION
Recording business transactions are very important and perform by every business firm in
order to have proper financial details at the end of every financial year. It is the main
responsibility of the financial department of the company. Transactions denotes to such activities
which shows profit and losses of company (Clarke, 2020). It involves several steps to record
business transactions which begins from the knowing of transactions and end with the closing of
accounts books. These are maintained on regular basis in order to avoid omission in the
transactions. In this, the first transaction must be analysed in order have an effective decision-
making regarding the accounts i.e. accounts which have impacted by the entries and decisions
made regarding debit and credit. Financial statements cannot be completed if the finance
employees do not have an idea of business dealings and transactions i.e. inflow and outflow of
cash.
ASSESSEMENT
Part A
1) David green wants to commence a sole proprietorship business. For starting a new business
David must have to follow the 10 steps. The steps are discussed below:- Conduct the market research: it is very important for the David green to conduct a
market research before the commencement of the new business. This will not only help
them in getting a proper idea but also help them in converting an excellent idea into a
good opportunity of business (Bradlow and Finkelstein 2018). Market research has been
done on the basis of what is the need and demand of the customer and what are the
number of business who operate in the same field or industry. This research also help in
obtaining the competitive advantage. Make the business plan: Business plan is like the backbone which help in specifying the
mission, vision, scope and many more things. This act as a blueprint which tells about
the foundation and structure of business along with this it also tells how a business
operates its functions. Provide funding to the venture: it is impossible for an individual to run a business
without money. This step is very important, as in this step different sources has been

analyse and identify for raising fund along with the liquidity held by the owner of the
company. Business location: location of the business has been considered as an important element
from the business point of view. The decision of finding the location for business is very
crucial. Production cost, sales, image and many more factor are depend on this step.
 Structure of the business: every organisation have its own legal structure whether it has
a small, large, medium, online or offline. These structure directly impact on the taxes of
the business that are to be paid by the company (Fellmeth 2020). Catchy business name: brand name help in recognising the name of the company. The
selection of an excellent and perfect name for the brand is not an easy task. Interesting
brand name help the organisation in attracting a huge customer base. Registering the business: After selecting the name the next step is to register the
business to HMRC. To protect the organisation legally it is very important to register a
firm. The firm trade under this name and the name of the firm is to register under the
state and central government. Taking iDs for federal and state tax: venture need to be register and they have to take
the ids of the employees for their identification. These ids help them to pay taxes. This is
very important to start the business and for the social security of the business.
 Apply for license: license is very important to start the business. Without proper
licensing a business man cannot run the organisation in a very effective manner. It is
mandatory and varies form industry to industry and location, state, and many more
(Ionascuand, Ionascu 2018)..
 Open the business account in bank: for doing transactions and any legal and paper
work it is very important for the business to have a bank a/c. This help in knowing the
actual capital of the firm.
2) To explain the definition, “Accounting is consisting with various activities such as
maintaining, recording, examining and concluding the business transactions to facilitate data for
the purpose of decision-making”. The company which is taken is Marks and Spencer in order to
know the decision-makers who make use of this data to make an effective decisions.
The users of Marks and Spencer who utilizes accounting data are:

 Owners and investors: These are the most important persons who requires accounting
information in order make an effective decisions about investing their money in the
company such as to purchase or hold the shares (Fellmeth, 2020). In case of Marks and
Spencer, they are necessitate to have a recorded data for the purpose of knowing profits
of company. Suppliers: The financial data can be used by suppliers to know the capacities of the entity
to pay the short-term obligation easily. With this information, they only supply the raw
materials to the entity. Lenders: These are those individuals who grants loan to the organisations. They are
required to have a financial statement and recorded business transactions to know the
liabilities of the business as well as the paying capacity. Employees: The recorded statements of finance also useful for employees to have a
decision regarding the ability of an organisation in order to pay salary and wages as well
as extra rewards. It will also assists in decision-making related with the development in a
specific company. Government: In case of Marks and Spencer, the legal authorities such as tax department
are likely to know the information related with business dealings so that they can know
the tax amount, the business will pay (Monye, 2021). Customers: These are the important users for the company who purchases and consumes
product and services of a company. They requires information to know the worth and
position of company so that they can make decisions to make further purchases or
become loyal to the company or not. It will also beneficial to know the stability position
of the firm.
 General public: Other users such as teacher, students, journalist and many more who
requires information for their own motives.
Role of chief accounting officer:- The CAO is the in charge of all the accounting activity within
the accounting department. he Chief accounting officer of the company is responsible for
managing all the accounting functions of an organisation which includes may activities like
making financial report, bookkeeping in a very effective manner. The CAO's is also responsible
for tax and regulatory compliance.

Role of Chief Financial Officer: It is the most important role in the organisation. A person who
holds the position of chief financial officer is the top position in the company. They are
answerable for tracking the cash flows, analysing the strengths and weaknesses of company,
financial planning while proposing tactful directions. Overall, he plays a multiple role from
financial reports to making tactful decision regarding where and when to invest the funds of
business.
Part B
1) Journal Entry for F Polk in the month of Sep 2021.
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 Syme Ltd
Office Fixtures
(Office fixtures bought through credit was written-off)
150
150
10/09/21 Bank
Bad Debts
M Abel
(M Abel declared bankruptcy and received the amount
180
131
311

in full settlement)
18/09/21 Machinery
Cash
Bank
Brown Ltd
(Purchased a machinery and the amount paid by
cheque, cash and on credit)
1800
100
500
1200
26/09/21 Brown Ltd
Bank
(Half of the amount due paid through cheque)
600
600
28/09/21 Insurance Expenses
Drawings
Bank
(Insurance expenses paid by bank but later realised that
£70 is of personal house)
60
70
130
2. Ledger accounts and Trial Balance in the books of Maurice & Brothers.
a) Make General Ledgers - This is made is excel.
b) Trial Balance
TRIAL BALANCE
Maurice & Brothers
Debit Credit
Bank 38880
Cash 6440
Van 46900
Office Fixtures 5460
Sharp Office Ltd (Creditor) 2400
Loan Payable 12400

Capital 70000
TOTAL 91240 91240
PART C
a) Create a income statement for B Morre.
Particulars Amount (£)
Sales 95000
Less: Sales Returns 3500
Less: Carriage Inwards 890
Net Sales (A) 90610
Opening Stock 18000
Purchases 110000
Less: Return Outwards 720
Less: Closing Stock 13000
Net Purchases (B) 114280
Motor Expenses 1400
Rent 7000
Telephone Charges 830
Wages and Salaries 14000
Insurance 1030
Office Expenses 800
Sundry Expenses 250
Operating Expenses (C) 25310

NET PROFIT (A -B - C) -48980
b) From the above calculation of income statement, it has been observed that the firm B Moore
has been facing losses of 48090 in 2021as well, if it has been compared with year from 2013 to
2021, the firm is generating income till 2019 (Pan and et.al., 2020). But, due to Covid-19
pandemic in 2020 and 2021, the firm is facing significant losses. Moreover, in 2021, there is
slightly fall in income as compare to 2020, where the loss is of 65400 but in 2021 it generated to
48090 which means the firm is in the line where they can begin with generating profit in the next
two to three years.
CONCLUSION
It is summarized from the above information is that recording transactions of business is
important and essential because all the figure, ratio and statement are being dependent upon it. If
the company do not have a financial statement then they cannot be able to make income
statement and could not know the various accounts of business.

REFERNCES:
Books and Journals:
Bradlow, D. D. and Finkelstein, J. G., 2018. Negotiating business transactions: an extended
simulation course. Wolters Kluwer.
Fellmeth, A. X., 2020. Introduction to international business transactions. Edward Elgar
Publishing.
Ionascu, I. and Ionascu, M., 2018. Business models for circular economy and sustainable
development: The case of lease transactions. Amfiteatru Economic. 20(48). pp.356-372.
Clarke, A. E., 2020. Is there a commendable regime for combatting money laundering in
international business transactions. Journal of Money Laundering Control.
Fellmeth, A. X., 2020. Introduction to international business transactions. Edward Elgar
Publishing.
Monye, F., 2021. Protection of Consumer Rights in Secured Credit Transactions in Nigeria. The
Gravitas Review of Business & Property Law, 12(3), pp.97-117.
Pan, X. and et.al., 2020. Blockchain technology and enterprise operational capabilities: An
empirical test. International Journal of Information Management, 52, p.101946.