Recording Business Transactions - Desklib

This report discusses the steps required to start a business, how accounting helps decision-makers, and prepares an income statement. It also talks about the users of accounts and highlights the importance of business transactions in accounting. Get solved assignments, essays, and dissertations on Desklib.

Business Transactions

INTRODUCTION
Business comes into existence with a sole motive of earning profits. There are different types of
business enterprises that an entrepreneur can setup the business in. Business transactions refers to
the events that happen in the life of a business. These events may include dealings between two
or more parties that are involved in the exchange of goods and services (Ramokanate, 2018).
These business transactions are recoded in the books of accounts which helps the business
managers in calculations of profit and ascertain the performance of the business. In this report
the main focus is on the recording of different transactions of companies and how these helps the
managers ascertain the profits and performance of the company. The first part of the report
highlights the steps that are required by an entrepreneur to start a business.
TASK
Part A
1) What are the steps required by an entrepreneur to start a business.
Sole proprietorship is a type of business in which there is only a single person who invests in the
business and that person manages all the activities of the business. David Green is a sole
proprietor and he wants to start a new business of decoration. He knows the whereabouts of
managing and investing in a business. He is not thorough with the roles and responsibilities that
are required to start a business. To aid David Green, following are the steps that he might want to
take into consideration before starting a new business.:
 Formulate a model: The first step to start a business is to ascertain its model and what
the business will deal in. This step focuses to give business leaders insights as to what the
actual demand is in the market and how they can tap these opportunities. Here, the
business will deal in decoration and decorating items (Abd Majid, Ariff, and Mohamad,
2020).
 Building a strategy: In this step the main focus of the entrepreneur is to be clear of the
visions and missions of the business that he they want to take up for the business. It also
focuses on how the business will have competitive advantage in the market.

 Formulating a business portfolio: In this step the entrepreneur has to build up the
techniques, goals and initiatives that the business will take. It also formulates the
business's products and services.
 Finding out equipment: In this step the management of the business decides what tools
and materials the business would be needing to manage and operate its business. Here,
the business will need drapes, decorating items etc (Rahmat, Ali, S.H.A. and Saleh,
2021).
 Formulating a long-term plan: In this step the entrepreneur needs to set up the
business's long-term objectives and how the business plans to grow in the market. At this
step they also determine hurdles that might come in its path.
 Creating a network: Engaging in activities related to welfare of the society and building
a network with suppliers and customers.
 Social media presence: The businesses now-a-days have to have their online presence to
gain visibility in a potential marketplace which would aid business in its settlement in
the marketplace.
2) Discuss how accounting helps the different decision-makers of a
company. Choose any company listed in London Stock
Exchange
Accounting refers to the process of recording, evaluating, and reporting of the financial data and
transactions of a business over a period of time. The main purpose of accounting is to determine
the profit and financial position of the business. To answer this question, the company taken up
is ASDA plc. ASDA plc. is listed in the London stock exchange and basically deals in retail
industry (Parikh, and Abdelfattah, 2020). Every decision in ASDA has to be effective because
any wrong decision can affect its overall management and competitive advantage. For this the
company mainly depends on its financial information. There are different users of the financial
information of ASDA plc. These are discussed below:
 Owners: they use this information to analyse the profitability of their investments. It
gives them insights about the business and its ability to pay dividends for their
investments. It also helps them determine future course of action.

 Creditors: these are interested to determine credit worthiness of the business. These
includes suppliers, banks, lenders of finance. It helps them analyse financial position of
the business and if they can extend any loans to them.
 Regulatory Authorities: they need to ascertain that the accounting information is in
accordance with the rules and complies with the law of state where the business is taking
place (Halaweh, 2018)
 Management: These users of the accounting information uses it to plan, control and
decision making. It helps them evaluate the performance of the organisation and position.
It basically helps them do their job better
 Investors: they need the accounting information as they want to ascertain the risk in
investing and the returns and plan accordingly how much amount and where they should
invest for better returns.
Part B
1) Pass the Journal Entries with Narratives
Date Particulars Debit Credit
01/09/21 Assets A/c
Fixtures
Stock
Debtors (105 + 311)
Bank
Cash
Creditors (229 + 80)
Capital
(Business being started)
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 150

Office Fixtures
(Office fixtures bought through credit was written-off)
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) Solve the following
a) Record the transactions in General ledger of Maurice and brothers – This part is shown
in excel.
b) Extract the 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
1)Prepare an Income statement for B Moore
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
2) Based on the income statements of previous year predict that whether the company will
attain profits or losses in the year 2022 taking into account the Covid-19 pandemic.
The year of 2020 has been considered as most challenging year for the businesses in the recent
times. While many business have shown a regular growth in the start of 2020, the Covid-19
pandemic have made many businesses discontinue their operations due to negligible profits. The
income statement of the company have noticed that the company made loss in the year 2020, the
main reason for this have been the pandemic that made customers purchase less due to safety
precautions and this made less revenue for the business. The previous years profits show that the
company was doing well pre covid-19 era. The trend shows that the company was all set to take
up their profits to 142000 pounds in the year 2020 but suffered loss of 65000. If the company
recovers this amount in 2021, the company will surely make a certain amount of profit in 2022.
CONCLUSION
From the above mentioned report, it can be concluded that accounting is important aspect in the
life of business. The business transactions forms the basis of accounting as these transactions are
recorded into the books of accounts and then the profits and loss is calculated from these
recordings. Trial balance helps the accountants determine whether the accounts have been
created accurately or not. The statement of profit and loss and performance is also made in the
above report for different companies as provided. The report also highlights what are the steps
needed for starting a business. And also talks about the users of accounts. In the report, ASDA
plc has been taken up to discuss the decision-makers of the business and how accounting helps
these users.

REFERENCES
Books and Journals
Ramokanate, L., 2018. Advertisement of goods for sale on websites: a pre-legislative scrutiny of
section 10 (2) of the Lesotho Electronic Transactions and Electronic Commerce Bill
2013. Lesotho Law Journal. 26(1). pp.105-146.
Abd Majid, N., Ariff, A.M. and Mohamad, N.R., 2020. The role of related party transactions on
sukuk financing. Journal of Islamic Accounting and Business Research.
Parikh, Y. and Abdelfattah, E., 2020, October. Clustering algorithms and RFM analysis
performed on retail transactions. In 2020 11th IEEE Annual Ubiquitous Computing,
Electronics & Mobile Communication Conference (UEMCON) (pp. 0506-0511). IEEE.
Rahmat, M.M., Ali, S.H.A. and Saleh, N.M., 2021. Auditor-client relationship and related party
transactions disclosure: the role of family controlling shareholders from a network
perspective. Managerial Auditing Journal.
Halaweh, M., 2018. Cash on delivery (COD) as an alternative payment method for e-commerce
transactions: Analysis and implications. International Journal of Sociotechnology and
Knowledge Development (IJSKD. 10(4). pp.1-12.

APPENDIX
Link to Excel