Recording Business Transactions Assessment 2

This report outlines the information related to the journal entries, ledger, trial balance, financial position, income statement and a writing letter to Linda. It also evaluates the performance of the company by calculating the ratios of the organization.

Assessment 2

TABLE OF CONTENTS
INTRODUCTION.............................................................................................................................................
ASSESSMENT 2..............................................................................................................................................
PART A...........................................................................................................................................................
a) Recording the transactions in T account............................................................................................
c) Formulating Trial balance as at 31st October 2021...........................................................................
d) Preparing income statement for the period ended 31st October 2021............................................
e) Formulating financial position as at 31st October 2021.....................................................................
f) Writing letter to Linda for her query regarding holiday.....................................................................
PART B...........................................................................................................................................................
Calculating ratios for Anne’s business.......................................................................................................
Evaluating the performance of company..................................................................................................
CONCLUSION.................................................................................................................................................
REFERENCES..................................................................................................................................................

INTRODUCTION
Recording the business transactions helps the company to have the record the entry of
the each transaction done in the business. It is the multi-step process which helps to examine
the each transaction and also to decide that which account swill be get affected. In the current
era, it is very essential for the company to keep the record of the data which helps in
coordinating with the finance department. The current project will outline the information
related to the journal entries, ledger, trial balance, financial position, income statement and a
writing letter to Linda. At last this report will outline the analysis on the performance of the
company by calculating the ratios of the organization.
ASSESSMENT 2
PART A
a) Recording the transaction in T account

C) Formulating Trial Balance As at 31st October 2021.
Particular Debit £ Credit £
Bank A/c 8030
Flat A/c 45000
Cash A/c 7340
Capital A/c 718000
Purchase A/c 5150

Purchase Return a/c 250
Home Ltd a/c 5150
Rent of office a/c 850
Computer a/c 2500
Printer a/c 200
Sales a/c 5600
Repairs of printer a/c 110
Rent a/c 800
Rayan a/c 150
Wages a/c 820
Withdrawal a/c 1200
Car a/c 12000
Total 83350 83350

d) Preparing the income statement for the period ended 31st October 2021.
Particulars Amount £ Amount £
Sales a/c 5600
Add: opening stock
Add: purchase 5400
Sub: purchase return 250
Sub: Closing stock 320 4830
Gross profit of the year 770
Add: Rent collected 800
1570
Indirect expenses
Rent office flat A/c 850
Repairs of printer A/c 110
Wages A/c 820 1780
Net loss 210
e) Formulating financial position as at 31st October 2021.

Particulars Amount £ Amount £
Non current assets
Flat a/c 45000
Computer a/c 2500
Printer a/c 200
car a/c 12000 59700
Current assets
Bank a/c 8030
Cash a/c 7340
Rayan a/c 150
Closing stock 320 15840
Less: Current liability
Home Ltd a/c 5150
Non Current liability 0
Net assets 70390
Owners equity
Capital a/c 71800
Sub: Withdrawal 1200
Sub: Net loss 210
Total liabilities and equity 70390
f) Writing letter to Linda for the query regarding the holiday

To Linda,
Subject: Query about the holiday
As there are various types of expenditure that are used by the business in order to
have the smooth flow of the business organizations. If the firm has to become
successful it has to follow the requirements and those requirements should be
coordinated by the head in order to have the smooth functioning process. The
recording business transactions allows the company to have and obtain the significant
information that are important for analysing the performance and make the company to
turn in order to take the strategic decision (Fatimah, Toha and Prakoso, 2019).
By evaluating the above prepared financial statements of the organization it can be
said and interpreted that there is low effectiveness in managing the overall
performance. The main cause behind this is that that company is obtaining net loss
from its operational activities for the specific period of time. There are several types of
requirements that are faced by the company and that requirements are needed to be
done in order to gain the greater amount of stability and effectiveness. There are many
other reasons that has resulted in the ineffective results but there is one main reason
behind this is identified that there is improper utilization of available resources.
Withdrawal of the company’s fund for conducting the holiday is found to have and
adverse impact on the company. The company has to require and to be understood for
having the smooth functioning by using the optimum resources and utilization of the
funds in the enterprise.
In order to achieve the desirable position in the business sectors, it is important for
the company to focus on recognizing the areas where they are lacking. By identifying
this it higher the effectiveness in order to meet the planned organizational goal. It is
also needed to be understand that eliminating the ineffective usage of fund for holiday

can make the company to have the permit in order to take the important decisions
which are helpful for developing the strong position in the business sector (Hariani and
Febriyastuti, 2020). For this purpose it become impotent for the enterprise to have the
emphasis in order to avoid such expenses which are irrelevant, so it helps the company
to earn the high profitability and improves the productivity of the enterprise. From this
basis, it is suggested to manage the resources effectively by achieving the objectives of
the higher stability and productivity.
PART B
Calculating ratios for Anne’s Business
Profitability ratio
Profitability ratios are the class of the financial metrics that are used in order
to assess the ability of the business to generate the earnings which are related to the
revenue, operating costs, balance sheet assets or by having the shareholder’s equity,

by using the data from the specific time.
Liquidity ratio
Liquidity ratios are the ratios which are very important in order to determine a
debtor’s capability to pay the current debt obligations. There are some liquidity ratios
which are quick ratio, current ratio, etc. This ratio is helpful in the business in order to
perform and to overcome from the short-term liabilities (Maheshwari, Maheshwari
and Maheshwari, 2021). This also makes the company know that quickly and nicely
they are managing the financial liquidity of the firm.

Efficiency ratio
The effectiveness of the company plays an important role in impacting the
company’s overall performance. The main reason behind this is to get the information
that the company is managing well in in its payment and collection in order to have
smooth functioning of the company (Palepu and et.al., 2020). There are various types
of stakeholders that are required to have the information which are basically related
with the efficiency in order to overcome the short-term debts of the company, so the
company can earn the high profits and the good decisions can be made.

GP ratio NP ratio Current ratio Quick ratio Trade
Receivable
days ratio
Trade
payable days
0.00%
200.00%
400.00%
600.00%
800.00%
1000.00%
1200.00%
Year 2021

Evaluating the performance of the organization
Ratios are helpful in order to evaluate the performance of the enterprise by having the focus
on the several factors. To become the successful in the competitive environment it is very
important for the organization to focus on evaluating the performance of the enterprise (Cai,
2021). By comparing with the similar firm’s performance it can be said that the firm is having
the higher effectiveness in order to overcome the short-term liabilities of the company.
The current ratio of the Anne’s business is 3.08 times that is higher ratio as compare to the
standard current ratio of the set company as it is negative indicator management for the firm.
As the firm is having the high current ratio makes the company not to have the more capital
expenditure. It is very important for the company to focus on the performance in order to
manage the overall performance of the company.in order to maintain this, it is very important
for the company to have the adequate level of current ratio in the company (Easton and et.al.,
2018). By comparing with the similar firm’s performance it can be said that the firm is having
the higher effectiveness in order to overcome the short-term liabilities of the company.
Quick ratio is helps the company in order to ascertain the cash and cash equivalents position
of the enterprise in order to handle the short-term liabilities in order to maintain the
credibility an sustainability in the business sector. The current ratio of the company is having
3.014 times that is higher as shown in the shown information of the competitor. This shows
that they are having less effectiveness as compared to Anne’s organization but possessing
appropriate level of the result.
Trade receivable and payable are the two metrics that are helpful in estimating the effieciency
of the organization which allow to gain the information that how to deal with debtors and
creditors. Trade payable are allows to analyse in order to analyse the effectiveness to pay off
the payments to the suppliers. The organization is taking the 25.51 days which are founded to
be greater as compare to other companies operating in the similar organization operating in
fewer days. According to this, it can be seen that the Anne’s business is performing good in
the financial factors and there are some lacking areas which is required in order to improve
the competitive benefits.

CONCLUISON
From the above project it is concluded that recording the business transactions is very
crucial for having the deep understanding of the factors of the company. By this the company
can make the sound decisions and earn the higher profits. The above project has evaluated the
information related to the journal entries, ledger, trial balance, financial position, income
statement and a written letter to Linda. At last this report has described the analysis on the
performance of the company by calculating the ratios of the organization.

REFERENCES
Books and journals
Easton, P. D. and et.al., 2018. Financial statement analysis & valuation. Boston, MA: Cambridge
Business Publishers.
Cai, C. W., 2021. Triple‐entry accounting with blockchain: How far have we come?. Accounting &
Finance. 61(1). pp.71-93.
Maheshwari, S. N., Maheshwari, S. K. and Maheshwari, M. S. K., 2021. Principles of Management
Accounting. Sultan Chand & Sons.
Palepu, K. G and et.al., 2020. Business analysis and valuation: Using financial statements. Cengage
AU.
Hariani, E. and Febriyastuti, R., 2020. The effect of fiscal stress, original local government revenue
and capital expenditures on efficiency ratio of government independence performance. Jurnal
Ekonomi dan Studi Pembangunan. 12(1). pp.18-25.
Fatimah, F., Toha, A. and Prakoso, A., 2019. The Influence of Liquidity, Leverage and Profitability
Ratio on Finansial Distress:(On Real Estate and Property Companies Listed in Indonesia Stock
Exchange in 2015-2017). Owner: Riset dan Jurnal Akuntansi. 3(1). pp.103-115.