Recording Business Transactions: Assessment 2

This report covers the recording of business transactions, preparation of financial statements, and calculation of accounting ratios for Anne York's furniture business. It also includes a letter addressing Anne's personal withdrawals and holiday queries. The report considers the impact of Covid-19 on the entity's profitability and compares its ratios with competitors.

RECORDING
BUSINESS
TRANSACTIONS
Contents
INTRODUCTION...........................................................................................................................2
Assessment II...................................................................................................................................2
Part A...............................................................................................................................................2

(a) Recording of entities transaction in Journal books:...............................................................2
(b) Ledgers Accounts of Anne York Business:...........................................................................4
(c) Preparation of Trial Balance as on 31st October 2021:...........................................................9
(d) Income Statement for the period ended 31st October 2021:...................................................9
(e) Statement of Financial Position as under:............................................................................10
(f) Letter addressed to Linda;....................................................................................................11
Part B.............................................................................................................................................11
(a) Calculation of Accounting Ratios of Anne Business: -........................................................11
(b) Interpretation of ratios calculated above considering competitor and covid 19 impact on
the entity:...................................................................................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business transaction is a monetary activity’s which is interfered between two or more
peoples encompassing exchange of goods, cash and resources. Recording of these transaction in
books of accounts is a process which involves various steps such as passing journal entry,
preparation of ledgers and last completion of books of accounts (Angiulli, Fassetti, and Saccà,
2018). This report highlights how financial statements are prepared starting from journal entries,
making of ledger accounts, trial balance, profitability statement and balance sheet of a proprietor
named as Anne who is running the furniture business. At the end of this file a letter is addressed
to Anne clarifying her regarding drawings she made from the entity’s funds and replying to
query she raised for holidays taken by her. Lastly ratios are calculated & interpreted taking into
account competitors statistics and Covid 19 eruption.
Assessment II
Part A
(a) Recording of entities transaction in Journal books:
JOURNAL ENTRIES IN BOOKS: -
Date Particulars Debit Credit
01/10/21 Bank
Cash
Flat
Car
Capital
(Business incorporated with bank, cash, flat and car)
10000
4800
45000
12000
71800
02/10/21 Purchases
Home Ltd
(Goods purchased on credit from Home Ltd.)
5400
5400
04/10/21 Computer
Printer
Bank
800
200
1000

(Computer and printer purchased and payment made
through bank)
05/10/21 Bank
Sales
(Goods amounting to 2800 sold for cash)
2800
2800
12/10/21 Repair Expense
Cash
(Repair expenses incurred and payment made in cash)
110
110
18/10/21 Home Ltd.
Purchases
(Furniture of 250 returned to home Ltd as purchase
return.)
250
250
21/10/21 Bank
Rental Income
(Rent received by the enterprise)
800
800
23/10/21 Rayan
Cash
Sales
(Goods sole to Rayan for 2100, out of which 1800 have
been received by cash and remaining on credit)
300
1800
2100
23/10/21 Cash
Sales
(Goods sold to David and cash received)
700 700
24/10/21 Laptop
Bank
( Laptop has been purchase for office purpose)
1700
1700
26/10/21 Wages
Bank
820
820

(Payment made to shopkeeper in cash amounting to
820 as wages)
30/10/21 Rent Expenses
Bank
(An office premises being rented by entity for which
rent has been paid for cash)
850
850
31/10/21 Drawings
Bank
(Amount withdraw from the business for personal use
by the proprietor)
1200
1200
31/10/21 Cash
Rayan
(Rayan a debtor of organisation of the entity paid their
debt)
150
150
(b) Ledgers Accounts of Anne York Business:
Bank Account
Date Particulars LF Amount Date Particulars LF 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

01/11/21 Balance b/d 8030
Cash Account
Date Particulars LF Amount Date Particulars LF 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
01/11/21 Balance b/d 7340
Flat Account
Date Particulars LF Amount Date Particulars LF Amount
01/10/21 Capital 45000 31/10/21 Balance c/d 45000
45000 45000
01/11/21 Balance b/d 45000
Car Account
Date Particulars LF Amount Date Particulars LF Amount
01/10/21 Capital 12000 31/10/21 Balance c/d 12000
12000 12000
01/11/21 Balance b/d 12000
Capital Account
Date Particulars LF Amount Date Particulars LF 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
01/11/21 Balance b/d 71800
Purchases Account
Date Particulars LF Amount Date Particulars LF Amount
18/10/21 Home Ltd 5400 02/10/21 Home Ltd 250
31/10/21 Balance c/d 5150
5400 5400
01/11/21 Balance b/d 5150
Home Ltd Account
Date Particulars LF Amount Date Particulars LF Amount
02/10/21 Purchases 250 18/10/21 Purchases 5400
31/10/21 Balance c/d 5150
5400 5400
01/11/21 Balance b/d 5150
Computer Account
Date Particulars LF Amount Date Particulars LF Amount
04/10/21 Bank 800 31/10/21 Balance c/d 800
800 800
01/11/21 Balance b/d 800

Printer Account
Date Particulars LF Amount Date Particulars LF Amount
04/10/21 Bank 200 31/10/21 Balance c/d 200
200 200
01/11/21 Balance b/d 200
Repair Account
Date Particulars LF Amount Date Particulars LF Amount
12/10/21 Cash 110 31/10/21 Balance c/d 110
110 110
01/11/21 Balance b/d 110
Rent Account
Date Particulars LF Amount Date Particulars LF Amount
21/10/21 Bank 850 30/10/21 Bank 800
31/10/21 Balance c/d 50
850 850
01/11/21 Balance b/d 50
Rayan Account
Date Particulars LF Amount Date Particulars LF Amount
23/10/21 Sales 300 31/10/21 Cash 150
31/10/21 Balance c/d 150
300 300
01/11/21 Balance b/d 150

Sales Account
Date Particulars LF Amount Date Particulars LF Amount
05/10/21 Bank 2800
23/10/21 Rayan 300
31/10/21 Balance C/d 5600 23/10/21 Cash 1800
23/10/21 Cash 700
5600 5600
01/11/21 Balance b/d 5600
Laptop Account
Date Particulars LF Amount Date Particulars LF Amount
24/10/21 Bank 1700 31/10/21 Balance c/d 1700
1700 1700
01/11/21 Balance b/d 1700
Wages Account
Date Particulars LF Amount Date Particulars LF Amount
26/10/21 Bank 820 31/10/21 Balance c/d 820
820 820
01/11/21 Balance b/d 820
Drawings Account
Date Particulars LF Amount Date Particulars LF Amount
31/10/21 Bank 1200 31/10/21 Balance c/d 1200
1200 1200
01/11/21 Balance b/d 1200

(c) Preparation of Trial Balance as on 31st October 2021:
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
TOTAL 82550 82550
(d) Income Statement for the period ended 31st October 2021:
INCOME STATEMENT FOR THE PERIOD ENDED 31ST OCTOBER 2021
Particulars Amount (£) Amount (£)

Net Sales 5600
Less: Cost of Goods Sold : -
Purchases 5150
Less : Closing Stock 320 4830
Gross Profit 770
Less: Operating Expenses
Repair Expenses 110
Rent 50
Wages 820 980
Net Loss -210
(e) Statement of Financial Position as under:
BALANCE SHEET AS ON 31ST OCTOBER 2021
Particulars Amount (£ )
ASSETS
Current Assets:
Stock 320
Bank 8030
Cash 7340
Debtor – Rayan 150
Total Current Assets (A) 15840
Non-Current Assets:
Flat 45000
Car 12000
Computer 800

Printer 200
Laptop 1700
Total Non-Current Assets (B) 59700
Total Assets ( A+B ) 75540
EQUITY AND LIABILITY
Liabilities:
Current Liabilities:
Creditors - Home Ltd. 5150
Total Current Liabilities (A) 5150
Equity:
Capital Invested 71800
Less: Drawings 1200
Add: Loss for the period -210
Total Equity (B) 70390
Total Liability ( A + B ) 75540
(f) Letter addressed to Linda;
£1200 is withdraw by Anne for its personal purpose from the business. It will be considered as
drawings for the entity and will be reduced from the capital invested at the beginning.
Part B
(a) Calculation of Accounting Ratios of Anne 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 times

 Acid Test ratio = (Current Assets – Stock) / Current Liabilities = (15480 – 320) / 5150 =
2.94 times
 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) Interpretation of ratios calculated above considering competitor and covid 19 impact on the
entity:
From the above ratios analysis, it can be interpreted that current ratio of Anne Business is
3.01 times and that of competitor is 2.60 times on an average which indicates that liquidity
position is better as compared to their competitor. Further they are also crossing ideal current
ratio is 2 which shows that entity has sound cash position (Karamchandani and Srivastava,
2020). The margin ratio of company is negative which indicates that they are not earning regular
profits as compared to competitors. However, there might be reason of Covid 19 as it reduces
sales of business concern of that period only. Covid has disturbed multiple enterprises as their
regular activities got troubled and the revenue are not meeting their benchmark. This might be
the reason of negative profits in the year 2021 as entity is not able to generate required sales and
not able to reduce their operating cost. The acid test ratio is great that showcase that company
can handle circumstances of dissolution or liquidation when payment need to be made to
debtholders. The accounts receivable and payable as compare to other players showcase the same
result in Anne business.
CONCLUSION
From the above stated report it can be established that recording business transaction is an
essential part of an entity in order to judge their profitability. After recording the business
transactions final accounts are prepared so that ratio analysis can be carried out to analyse the
actual figures compared to budgets. Ratios are analysed after considering covid 19 impact on the
profits and competitors figures for such periods. At the end of this repost interpretation has been
made so that the management of the organisation can learn from them and improve their adverse
marks in order to improve profitability of the entity.

REFERENCES
Angiulli, F., Fassetti, F., and Saccà, D., 2018, June. Achieving service accountability through
blockchain and digital identity. In International Conference on Advanced Information
Systems Engineering (pp. 16-23). Springer, Cham.
Karamchandani, A., and Srivastava, R.K., 2020. Perception-based model for analyzing the
impact of enterprise blockchain adoption on SCM in the Indian service
industry. International Journal of Information Management. 52. p.102019.
Menna, F., Agrafiotis, P. and Georgopoulos, A., 2018. State of the art and applications in
archaeological underwater 3D recording and mapping. Journal of Cultural
Heritage. 33. pp.231-248.
Müßigmann, B., von der Gracht, H. and Hartmann, E., 2020. Blockchain technology in
logistics and supply chain management—A bibliometric literature review from 2016
to January 2020. IEEE Transactions on Engineering Management. 67(4). pp.988-
1007.
Pasala, S., Pavani, V., and Narayana, V.L., 2020. Identification of attackers using blockchain
transactions using cryptography methods. Journal of Critical Reviews. 7(6). pp.368-
375.
Perez, M.R.L., Gerardo, B. and Medina, R., 2018, November. Modified sha256 for securing
online transactions based on blockchain mechanism. In 2018 IEEE 10th International
Conference on Humanoid, Nanotechnology, Information Technology, Communication
and Control, Environment and Management (HNICEM) (pp. 1-5). IEEE.
Rimba, P., Tran, A.B., and Xu, X., 2020. Quantifying the cost of distrust: Comparing
blockchain and cloud services for business process execution. Information Systems
Frontiers. 22(2). pp.489-507.
Thakur, V., Doja, M.N., and Khadanga, G., 2020. Land records on blockchain for
implementation of land titling in India. International Journal of Information
Management. 52. p.101940.