Recording Business Transactions - Desklib

This report by Desklib covers the steps to start a new venture of decorator, decision makers involved in accounting, journal entries, ledgers, trial balance, and income statement. It also discusses the impact of Covid-19 on the profit of B Morre for the year 2022.

Recording Business
Transactions

Table of Contents
ASSESSMENT 1.............................................................................................................................4
INTRODUCTION ..........................................................................................................................4
PART A...........................................................................................................................................4
Define the steps of staring the new venture of decorator............................................................4
Take a company which is listed on London Stock Exchange and define the decision makers
which have an involvement in the accounting............................................................................5
PART B............................................................................................................................................6
1. Record the journal entries in the F Polk books.......................................................................6
2. Make the ledger accounts in the books of Maurice and brothers............................................7
PART C..........................................................................................................................................10
Create a income statement for B Morre....................................................................................10
b) Explain what the profit can be increased or decreased for the year 2022, considering the
Covid – 19 pandemic. ..............................................................................................................10
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12
ASSESSMENT 2...........................................................................................................................13
INTRODUCTION.........................................................................................................................13
PART A.........................................................................................................................................13
a) Record the double entry........................................................................................................13
b) General Ledgers....................................................................................................................14
c) Trial Balance.........................................................................................................................17
d) Prepare Income Statement ending on 31 October 2021.......................................................18
e) Make the statement of financial position..............................................................................18
f) What drawings are concerning small business about the holiday.........................................19
PART B..........................................................................................................................................20
a) Calculate the ratios from the above calculations for Anne's business..................................20
b) Assuming Anne's competitors ratio's averages, analyse the performance of Anne's firm.
Also explain the impact of Covid – 19 on the average ratio.....................................................20
CONCLUSION..............................................................................................................................21

REFERENCES..............................................................................................................................22

ASSESSMENT 1
INTRODUCTION
Business transaction is a financial state of an organisation which depicts the fiscal health
of the company. These are sorted in two groups, journals and ledgers. Journal records all the
fiscal entries of the business in a book. Ledgers gives the opening and the closing balance of the
different accounts mentioned in journals (Langemeier, 2020). In this report, an individual want
of set up a business of decorator, so the steps of setting up of the venture is mentioned. Further,
the decision makers need the assistance of financial accounting is explained of Marks and
Spencer. Then, the journal entries, ledgers, trial balance and income statement is made
considering the transaction details given.
PART A
Define the steps of staring the new venture of decorator.
David Green is a sole proprietor and want to start up a novel business of decorating. He is
aware of the accountability of all the debts which may incur to the company. Although, he dos
not know about the roles and responsibilities of starting of the enterprise. So he want a
consultation in some steps of opening of the business.
1. Make a model: To achieve success in the business, he needs to first frame a model, which
will be helpful in organising of the business activities. The activities and services which
are to be offered must be decided.
2. Build a strategy for the business: A strategy is made to achieve success which can be
achieved only when the vision and mission will be clear (Larson and et. al., 2017). For
this, one must set the competitive advantage and made the decision based on the fact and
plan a systematic growth for the undertaking.
3. Building of a business portfolio: It is like a brochure, which mentions the goals,
competencies and the initiatives which are taken or to be take by the company. It will
also have the details about the project which are to be carries out successfully in future. It
also highlights the information about the top executives, their skills and profession etc.

4. Find out the equipments needed: The management must first decide about what are the
instruments or materials needed for operation of the business activities. For example, in
decorating business, the drapes, balloons etc.
5. Build a technical road-map: The short and the long – term objectives must be decided. It
will help in understanding the possibilities and the hurdles which can come in the path of
fulfilling it (Li, Zhijun and Yingjie, 2021). It will also assist in setting a specific period of
time which will lead to completion of the tasks on time.
6. Social media presence: Now a days, people more prefer to search online about the
business proposals. So, it is crucial for David to create accounts on different social medial
platforms such as, Instagram, LinkedIn, Facebook etc. It will increase the visibility and
may help in getting the projects. The owner can also post some pictures or videos related
to the business, it will aid the customers in knowing more about the firm's work process.
7. Create a Network: Every business must engage in the activities related to the welfare of
the society, to promotes the sustainable environment. It increases the goodwill and help
in building a community which will promote the organisations. Creating more contacts is
a free promotion technique and it will also increase the customers.
Thus, by following the above steps, David Green can establish his business and achieve goals
which will helps in developing the firm as well.
Take a company which is listed on London Stock Exchange and define the decision makers
which have an involvement in the accounting.
Accounting is a process of recording, evaluating and concluding of the entries which
gives the accounting data and helps in decision – making. The goal of accountancy is to gives the
financial information about the business. It help in knowing about the fiscal position and
performance which can be used in taking decisions by the users (Neeraj and et. al., 2017).
Administrators at all levels of an organization structure are called decision – makers, since they
settle on choices dependent on bookkeeping information and facts. Marks and Spencer is listed
on the London Stock Exchange and numerous decision-makers and accountable for the position
of the company in the market. Acquisition, inducements, and the procurement of long-term
resources for foster labour and products could be considered. Exact data is important to

guarantee that the organization's business is beneficial. Every decision taken in the firm depends
directly or indirectly on the users of Marks and Spencer.
Decision-makers in Accounting:
1. Owners: They might check the pace of return accomplished using accounting data and
assess the results of the firm to those of comparable organizations.
2. Creditors: It can utilize bookkeeping information to evaluate the dependability and
capacity to reimburse the obligations of an enterprise.
3. Government: The public authority needs accounting information of the undertaking to
gather different kinds of taxes, such as direct and indirect (Osório, 2017).
4. Management: These are people who figure and make arrangements for the future.. The
plan is made according to the goals of the business. The customers of the accounting
information uses it to plan, control and simply decide. It helps them with evaluating the
presentation and position of the firm.
5. Investors: Before contributing, entrepreneur should survey and examine the monetary
condition using the accounting data of an organisation.
PART B
1. Record the journal entries in the F Polk books.
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 105

P Mullen
(Bad Debts written-off)
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
in full settlement)
180
131
311
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. Make the ledger accounts in the books of 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
19/08/21 Toyota Co. 8700
31/08/21 Balance c/d 6440 25/08/21 Bank 430
9240 9240
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 28/08/21 Office Fixtures 750
31/08/21 Balance c/d 38880
49630 49630
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
Office Fixtures
Date Particulars Ref Amount Date Particulars Ref Amount
01/08/21 Capital 1200

05/08/21 Bank 1000
05/08/21 Sharp Office Ltd 2400 31/08/21 Balance c/d 5460
15/08/21 Cash 110
28/08/21 Bank 750
5460 5460
Sharp Office (Creditor)
Date Particulars Ref Amount Date Particulars Ref Amount
31/08/21 Balance c/d 2400 05/08/21 Office Fixtures 2400
2400 2400
Toyota Co. Accountable
Date Particulars Ref Amount Date Particulars Ref Amount
19/08/21 Cash 8700 08/08/21 Van 8700
8700 8700
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
Capital Account
Date Particulars Ref Amount Date Particulars Ref Amount
31/08/21 Office Fixtures 1200
31/08/21 Van 32000 31/08/21 Balance c/d 70000
31/08/21 Bank 36800

70000 70000
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
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
TOTALS (A – B - C) -48980
b) Explain what the profit can be increased or decreased for the year 2022, considering the Covid
– 19 pandemic.
For many companies, 2020 was one of the most challenging situations in recent times.
While most enterprises made a regular progress in early 2020, the Covid-19 pandemic
discontinued the progress in most part of the world in mid-March. From interruptions in day – to
– day activities to the complete closure of certain the firms.
According to the income statement, the company had suffered a loss (Wang and et. al., 2021).
This indicated that the expenses have exceeded revenue. However, sales from the organization
makes some money but cannot cover its expenses. This could be due to the Covid pandemic,
which has resulted in lower demand for the items and services and thus lower sales. The likely
consequences are numerous, ranging from small direct effects such as a business closure to
relatively long and indirect effects such as changes in business strategy. Understanding the
impact of the organization and the financial implications is critical for the business owner.

CONCLUSION
From the above report, it can be concluded that fixing a business strategy is crucial when
starting a business. The entry of the journal entry, general ledger and profit and loss account
reflects the company's financial position. The net profit is shown in the profit and loss account.
In this report, Marks and Spencer is taken and the decision-makers of the organisation is
explained.

REFERENCES
Books and Journals
Langemeier, M., 2020. Sources and Uses of Funds Statement. Center for Commercial
Agriculture, Purdue University.
Larson, M.P. and et. al., 2017. A case integrating financial and tax accounting using the balance
sheet approach to account for income taxes. Issues in Accounting Education. 32(4).
pp.41-49.
Li, Z., Zhijun, C. and Yingjie, X., 2021. Internal Capital Transaction, Market Dependence and
Subsidiary Innovation. Management Review. 33(8). p.104.
Neeraj, K.R. and et. al., 2017, August. A domain specific language for business transaction
processing. In 2017 IEEE International Conference on Signal Processing, Informatics,
Communication and Energy Systems (SPICES). (pp. 1-7). IEEE.
Osório, R.S., 2017. Business relationships in mining and its major transaction costs of production
and economic empowerment. Economic Analysis of Law Review. 8(2). pp.178-205.
Wang, T.D. and et. al., 2021. Teaching Business Transaction Cycles Using a Hands-on Activities
Approach. Journal of Emerging Technologies in Accounting.

ASSESSMENT 2
INTRODUCTION
Business transactions refers to the dealings between the two or more parties involving the
exchange of goods and services. It is must that the entries involved are measured in the form of
money and is related to business only. These are recorded for the whole business and does not
give space to any of the personal transactions (Barmuta and et. al., 2019). The report is based on
recording of journal entries, posting them to ledger. It further prepares the trial balance along
with the preparation of financial accounts. Their is also an analysis of the performance of
company on the basis of ratios calculated for it.
PART A
a) Record the double entry.
JOURNAL ENTRIES
Date Particulars Debit Credit
01/10/21 Bank
Cash
Flat
Car
Capital
10000
4800
45000
12000
71800
02/10/21 Purchases
Home Ltd
5400
5400
04/10/21 Computer
Printer
Bank
800
200
1000
05/10/21 Bank
Sales
2800
2800
12/10/21 Repair Expense
Cash
110
110

18/10/21 Home Ltd.
Purchases
250
250
21/10/21 Bank
Rent Income
800
800
23/10/21 Rayan
Cash
Sales
300
1800
2100
23/10/21 Cash
Sales
700 700
24/10/21 Laptop
Bank
1700
1700
26/10/21 Wages
Bank
820
820
30/10/21 Rent Expenses
Bank
850
850
31/10/21 Drawings
Bank
1200
1200
31/10/21 Cash
Rayan
150
150
b) General Ledgers
Bank
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 10000 04/10/21 Computer 800
21/10/21 Rent 800 04/10/21 Printer 200
05/10/21 Sales 2800 24/10/21 Laptop 1700
26/10/21 Wages 820

30/10/21 Rent 850
31/10/21 Drawings 1200
31/10/21 Balance c/d 8030
13600 13600
Cash
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 4800 12/10/21 Repair 110
23/10/21 Sales 1800
23/10/21 Sales 700
31/10/21 Rayan 150 31/10/21 Balance c/d 7340
7450 7450
Flat
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 45000 31/10/21 Balance c/d 45000
45000 45000
Car
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 12000 31/10/21 Balance c/d 12000
12000 12000
Capital
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Bank 10000

01/10/21 Cash 4800
01/10/21 Flat 45000
31/10/21 Balance c/d 71800 01/10/21 Car 12000
71800 71800
Purchases
Date Particulars Ref Amount Date Particulars Ref Amount
18/10/21 Home Ltd 5400 02/10/21 Home Ltd 250
31/10/21 Balance c/d 5150
5400 5400
Home Ltd
Date Particulars Ref Amount Date Particulars Ref Amount
02/10/21 Purchases 250 18/10/21 Purchases 5400
31/10/21 Balance c/d 5150
5400 5400
Computer
Date Particulars Ref Amount Date Particulars Ref Amount
04/10/21 Bank 800 31/10/21 Balance c/d 800
800 800
Printer
Date Particulars Ref Amount Date Particulars Ref Amount
04/10/21 Bank 200 31/10/21 Balance c/d 200
200 200

Repair Expenses
Date Particulars Ref Amount Date Particulars Ref Amount
12/10/21 Cash 110 31/10/21 Balance c/d 110
110 110
Rent
Date Particulars Ref Amount Date Particulars Ref Amount
21/10/21 Bank 850 30/10/21 Bank 800
31/10/21 Balance c/d 50
850 850
Rayan
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
Sales
Date Particulars Ref Amount Date Particulars Ref Amount
05/10/21 Bank 2800
23/10/21 Rayan 300
31/10/21 Balacne C/d 5600 23/10/21 Cash 1800
23/10/21 Cash 700
5600 5600
Laptop

Date Particulars Ref Amount Date Particulars Ref Amount
24/10/21 Bank 1700 31/10/21 Balance c/d 1700
1700 1700
Wages
Date Particulars Ref Amount Date Particulars Ref Amount
26/10/21 Bank 820 31/10/21 Balance c/d 820
820 820
Drawings
Date Particulars Ref Amount Date Particulars Ref Amount
31/10/21 Bank 1200 31/10/21 Balance c/d 1200
1200 1200
c) Trial Balance.
Particulars Debit Credit
Bank 8030
Cash 7340
Flat 45000
Car 12000
Capital 71800
Purchases 5150
Home Ltd 5150
Computer 800
Printer 200

Repair Expenses 110
Rent 50
Rayan 150
Laptop 1700
Wages 820
Drawings 1200
Sales 5600
TOTALS 82550 82550
d) Prepare Income Statement ending on 31 October 2021.
INCOME STATEMENT
Particulars Amount (£) Amount (£)
Net Sales 5600
Less: Cost of Goods Sold 4830
Purchases 5150
Add: Closing Stock 320
Gross Profit 770
Less: Operating Expenses 980
Repair Expenses 110
Rent 50
Wages 820
Net Loss -210
e) Make the statement of financial position.
BALANCE SHEET

Particulars Amount (£ )
ASSETS
Current Assets
Stock 320
Bank 8030
Cash 7340
Debtor (Rayan) 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
Total Current Liabilities 5150
Equity

Capital 71800
Less: Drawings 1200
Net Loss -210
Total Equity 70390
Total Liabilities 75540
f) What drawings are concerning small business about the holiday.
Linda must be told that the amount of 1200 has been transferred from the business
account in order to book a hotel and flight in Scotland for her vacation (Burke, 2021). These are
considered draws as a portion of the bank account that was paid for Anne York's vacation is
withdrawn.
PART B
a) Calculate the ratios from the above calculations for Anne's business.
 Net Profit Margin = (Net profit / Net Sales) * 100
= (-210 / 5600) * 100 = -3.75%
 Gross Profit Margin = (Gross Profit / Net Sales) * 100 = (770 / 5600) * 100 = 13.75%
 Current Ratio = Current Assets / Current Liabilities = 15480 / 5150 = 3.01
 Acid Test ratio = (Current Assets – Stock) / Current Liabilities = (15480 – 320) / 5150
= 2.94
 Accounts Receivable Collection Period = (Average Debtors / Net Sales) * 365 = (150 /
5600) *365 = 9.78 Days
 Accounts Payable Payment Period = (Average Creditors / Net Purchases) * 365 =
(5150 / 5150) * 365 = 365 Days

b) Assuming Anne's competitors ratio's averages, analyse the performance of Anne's firm. Also
explain the impact of Covid – 19 on the average ratio.
It can be assumed that Anne's Business is not performing well compared to the
competition. The company has high working capital compared to its short-term debt, which
shows that the company has a strong financial position compared to the average of its
competitors. In order to survive in the competition, Anne's business is therefore very efficient.
The outbreak of the global pandemic has severely impacted the company's operations, reducing
profitability margins. This eventually revealed a decline in the company's profits. It was strongly
recommended that the respective company take care of the handling of the business in the post-
corona phase. Some new and varied changes need to be adopted by the company in order for it to
get back on track with high profits (DE STREEL and et. al., 2020). Once the situations in the
market have normalized, the functioning of the business operations is automatically improvised
in the most effective way, which ultimately leads the company on the path to success.
Anne's ratios which are calculated above depicts that the firm is in the loss. It needs to lower its
operating expenses. Comparing to the competitors ratio, the net profit of them is very good, than
the Anne's firm. The gross profit margin of the firm of Anne's firm is also less than the
competitor's average ratio.
So, it can be evaluated from the above analysis that Anne have to amend its business strategy
which can help it in decreasing the direct cost, leading to increase in the net profit.
CONCLUSION
From the above analysis, it can be concluded that it is very important to record all the
business transactions in the books of accounts. They helps in maintaining the record of all the
financial activities taking place in the business. Final accounts prepared on the basis of these
helps the firm and other users in reviewing the performance of the business. They are also used
for calculating the ratios through which the companies and investors try to make their investing
and other decisions. So, overall it can be said that the all firms must record their business
transactions properly and according to the rules.

REFERENCES
Books and Journals
Barmuta, K.A. and et. al., 2019. Mathematical model of optimizing the balance sheet structure of
the Russian banking system with allowance for the foreign exchange risk
levels. Entrepreneurship and Sustainability Issues. 7(1). p.484.
Burke, J.J., 2021. Distributed Ledger Technology. In Financial Services in the Twenty-First
Century. (pp. 131-154). Palgrave Macmillan, Cham.
DE STREEL, A. and et. al., 2020. Online Platforms' Moderation of Illegal Content Online: Law,
Practices and Options for Reform.
Giovanni, N. and et. al., 2019. Electronic Accounting: Electronic Journal and Ledger with
Decision Support System. In 2019 IEEE 11th International Conference on Humanoid,
Nanotechnology, Information Technology, Communication and Control, Environment,
and Management (HNICEM). (pp. 1-6). IEEE.
Hughes, A. and et. al., 2019. Beyond Bitcoin: What blockchain and distributed ledger
technologies mean for firms. Business Horizons. 62(3). pp.273-281.
Lakhtionova, L., 2021, February. Analysis of the Balance Sheet Liquidity in the Digital Age.
In International Conference on Advances in Digital Science. (pp. 45-57). Springer,
Cham.