Recording Business Transactions - Desklib

This report explains how to record business transactions, prepare general ledgers, formulate trial balance, construct income statement, and provide balance sheet details. It also covers determining accounting ratios and the impact of Covid-19 on profits of the business. The report concludes that recording business transactions in the journal and then posting it ledger to the final accounts makes it possible for the management to understand the shortfalls of the organisation and have to decide accordingly the new strategies which it has to implement.

Business Transactions
Assessment 2

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
Record the enterprise proceedings in the journal...................................................................3
Prepare general ledgers...........................................................................................................5
Formulate the Trial Balance...................................................................................................8
Construct the Income Statement.............................................................................................8
Provide details of the Balance Sheet......................................................................................9
Explain the drawings in the case of Anne to Linda .............................................................10
TASK 2 .........................................................................................................................................10
Determine the Accounting Ratios of the Business...............................................................10
What can be seen as an impact of Covid-19 on the profits of the business.........................11
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
The transactions which are of monetary and non-monetary nature are termed as business
transactions. These transactions takes place during the business operation and are done with the
motive to earn profit (Salviotti, De Rossi, and Abbatemarco, 2018). These transactions are
recorded in the different books of accounts to determine the profits/losses of the accounting
period. Further reports show that how the transactions are to be recorded and then how they are
transferred to the financial statements to reach to final conclusion of the recorded transactions.
At last Ratio Analysis is performed to interpret the different aspects of the final accounts.
TASK 1
Record the enterprise proceedings in the journal.
JOURNAL ENTRIES
Date Particulars Debit Credit
01/10/21 Bank
Cash
Flat
Car
Capital
(Business being started with cash, flat and a car)
10000
4800
45000
12000
71800
02/10/21 Purchases
Home Ltd
(goods of the firm i.e., furniture being purchased on
credit from Home ltd.)
5400
5400
04/10/21 Computer
Printer
Bank
(Computer and printer being bought for cash)
800
200
1000
05/10/21 Bank
Sales
2800
2800

(Goods worth 2800 being sold)
12/10/21 Repair Expense
Cash
(repair expenses incurred for repairs done in printer)
110
110
18/10/21 Home Ltd.
Purchases
(Furniture of wroth 250 being returned to home ltd.)
250
250
21/10/21 Bank
Rent Income
(Rent being received by the organisation)
800
800
23/10/21 Rayan
Cash
Sales
(sold goods to Rayan worth 2100, out of which, 1800
have been received by the business)
300
1800
2100
23/10/21 Cash
Sales
(sold goods to David for cash)
700 700
24/10/21 Laptop
Bank
(A new laptop has been bought for official use.
1700
1700
26/10/21 Wages
Bank
(shopkeeper has been paid monthly wages)
820
820
30/10/21 Rent Expenses
Bank
(a place being rented by the business and paid expenses
for same)
850
850

31/10/21 Drawings
Bank
(Money being paid by the business for a personal
expense of the owner)
1200
1200
31/10/21 Cash
Rayan
(Rayan, the debtor of the business paid for the debt)
150
150
Prepare general ledgers
Bank Account
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 Account
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 Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 45000 31/10/21 Balance c/d 45000
45000 45000
Car Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 12000 31/10/21 Balance c/d 12000
12000 12000
Capital Account
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 Account
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 Account
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 Account
Date Particulars Ref Amount Date Particulars Ref Amount
04/10/21 Bank 800 31/10/21 Balance c/d 800
800 800
Printer Account
Date Particulars Ref Amount Date Particulars Ref Amount
04/10/21 Bank 200 31/10/21 Balance c/d 200
200 200
Repair Expenses Account
Date Particulars Ref Amount Date Particulars Ref Amount
12/10/21 Cash 110 31/10/21 Balance c/d 110
110 110
Rent Account
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 Account

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 Account
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 Account
Date Particulars Ref Amount Date Particulars Ref Amount
24/10/21 Bank 1700 31/10/21 Balance c/d 1700
1700 1700
Wages Account
Date Particulars Ref Amount Date Particulars Ref Amount
26/10/21 Bank 820 31/10/21 Balance c/d 820
820 820
Drawings Account
Date Particulars Ref Amount Date Particulars Ref Amount
31/10/21 Bank 1200 31/10/21 Balance c/d 1200

1200 1200
Formulate the 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
Construct the Income Statement
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
Provide details of the Balance Sheet
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
Explain the drawings in the case of Anne to Linda
Anne made a drawing of 1200 from the business, which was used by her for the personal purpose
holiday and hotel expenses (Gottinger and Munich, 2018).
TASK 2
Determine the Accounting Ratios of the 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
Interpretation: From different ratios calculated above of Anne. Above calculated ratios states
that the business of Anne is not up to the mark as the current ratio of its competitor is more than
her and with incurring low cost they are earning more. Her business's current asset is less as
compared to the competitors which helps them to properly manage its short term operations.
What can be seen as an impact of Covid-19 on the profits of the business.
Covid has effected the trading operation of the business as the movement of local people
was prohibited when it was at its peak. A considerable consequences of the pandemic can be
seen in the final reports of the business due to which it has to suffer losses (Panachev, Berg,
et.al., 2019). It was advised to take care of the management of labour in Post covid stage.
Different new and innovative ideas have to be inculcated so that the organisation can return to
the profits. Once everything comeback to normalized form then the business will be able to get
back on track and the enterprise will move towards attaining its goals.
CONCLUSION
From the above mentioned report it can be concluded that recording business transactions in
the journal and then posting it ledger to the final accounts makes it possible for the management
to understand the shortfalls of the organisation and have to decide accordingly the new strategies
which it has to implement. From the financial statements provides insights to the different users
regarding the performance and profits earned by the business. In the above report business
transactions are recorded and interpretation of the financial ratios is calculated from the data
provided.

REFERENCES
Books and Journals
Salviotti, G., De Rossi, L.M. and Abbatemarco, N., 2018, January. A structured framework to
assess the business application landscape of blockchain technologies. In Proceedings of
the 51st Hawaii International Conference on System Sciences.
Gottinger, H.W. and Munich, S.T.R.A.T.E.C., 2018. Intelligent Decision Support Machines for
Business Decisions. Transactions on Machine Learning and Artificial Intelligence. 6(2)
p.10.
Panachev, A.A., Berg, et.al., 2019, December. Structural analysis of network transactions
between economical agents of a municipality. In AIP Conference Proceedings (Vol.
2186 No. 1 p. 050016). AIP Publishing LLC.
Liang, T.P. and Liu, Y.H., 2018. Research landscape of business intelligence and big data
analytics: A bibliometrics study. Expert Systems with Applications 111 pp.2-10.
Mayer, L.A., Arena, et.al., 2020. Prototyping Using Other Transactions: Case Studies for the
Acquisition Community. RAND Corporation Santa Monica United States.
Sun, L. and Pan, C., 2018. Logistics Optimization of E-Business Supply Chain in Chemical Raw
Material Company. Chemical Engineering Transactions. 66. pp.1405-1410.
Ballestar, M.T., Grau-Carles, P. and Sainz, J., 2018. Customer segmentation in e-commerce:
Applications to the cashback business model. Journal of Business Research 88. pp.407-
414.
(Salviotti, De Rossi, and Abbatemarco, 2018)(Gottinger and Munich, S.T.R.A.T.E.C., 2018)
(Panachev, Berg, et.al., 2019)(Liang, and Liu, 2018)(Mayer, Arena, et.al., 2020)(Sun,
and Pan, 2018)(Ballestar, Grau-Carles and Sainz, 2018)