Recording Business Transactions: Assessment 2

This report discusses the recording of business transactions, preparation of financial statements, and interpretation of accounting ratios. It also explores the impact of Covid-19 on the profits of the business. The report includes journal entries, general ledgers, trial balance, income statement, and balance sheet.

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 business transactions means all the monetary and non-monetary events that take
place in the business which relates to the operations of the business done for the motive of
earning profits (de Souza Junior, and et.al.,2019). The above discussed transactions are recorded
in the books of accounts of the business for the motive of determining the profits earned by the
business. The further report highlights how different transactions are recorded in the books of
accounts of the business and further transferred to the financial statements to derive profits or
losses from these transactions. Ratio analysis is also performed of the different financial values
and an interpretation is provided for the same.
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 2800

Sales
(Goods worth 2800 being sold)
2800
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
850
850

for same)
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
Drawings in the case of Anne is the amount of 1200 that have been paid by the business bank
account but were used by Anne for her personal holiday and hotel expenses. These expenses
were not done for the business (Kassie, B., 2021).
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 (Wiratama, and Asri, 2020) =
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: The above calculations shows the different ratios of Anne. From these it can be
interpreted that the business of Anne is not performing up to the mark. Its competitors are
earning more profits at low expenses. The competitors of Anne have high current assets which
makes their short term liquidity better than the business of Anne. Anne' s assets employement is
good than many of the businesses working in the industry but the business should focus on
performing better.
What can be seen as an impact of Covid-19 on the profits of the business.
The action of the erratic pandemic have in some way afflicted the trading operations of the
undertaking considerably due to which the gain amount have weakened (Small, R., Jansen, J. and
Smidt, L., 2019). This at last revealed a demolition in the profits of the enterprise concern. It has
been exceedingly advised to the several organizations to take care of management of the labour
in the post corona stage. Several new and different modifications demand to be adopted by the
business organisation so that it can come backmost on track with high plane of profits. Once the
determination in the marketplace place are normalized, it will automatically extemporise the
working of the undertaking operation in the most impressive fashion which will eventually lead
the enterprise towards the way of accomplishment (Swango, D.L., 2018).
CONCLUSION
From the above mentioned report it can be concluded that the recording of business transactions
is one of the main prospect in the business as it aids the management to understand where the
business is lacking and where it need to implement new strategies. The accounting and

preparation of financial statements also gives insights to its different users about the performance
of the business and the profits earned by the business. The above report shows recording of such
business transactions and interpretation of the financial ratios calculated from the information
provided.

REFERENCES
Books and Journals
de Souza Junior, and et.al.,2019. Accountancy teaching in Brazil: epistemology, pedagogy and
professional knowledge. Revista de Educação e Pesquisa em Contabilidade. 13(3).
Kassie, B., 2021. The effect of demographic factors on ethical dilemma: empirical evidence from
certified public accountancy firms in Ethiopia. African Journal of Accounting, Auditing
and Finance. 7(3). pp.205-224.
Small, R., Jansen, J. and Smidt, L., 2019. Developing professional judgement competence in the
accountancy profession. Professional Accountant, 2019(36), pp.10-12.
Swango, D.L., 2018. Borrowing from Accountancy. Appraisal Journal. 86(4).
Venter, E.R., Gordon, E.A. and Street, D.L., 2018. The role of accounting and the accountancy
profession in economic development: A research agenda. Journal of International
Financial Management & Accounting. 29(2). pp.195-218.
Wildberg, J. and Möhring, B., 2019. Empirical analysis of the economic effect of tree species
diversity based on the results of a forest accountancy data network. Forest Policy and
Economics. 109. p.101982.