Recording Business Transactions

This report explains the process of recording business transactions and the use of accounting applications. It covers topics such as journal transactions, balance sheets, trial balances, income statements, and financial ratios. The report also includes a comparison of Linda's business performance with its competitors.

Recording business
transactions

Table of Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
Journal transactions of T- accounts:............................................................................................1
Balance the accounts and an opening balances:..........................................................................2
Trial balance:...............................................................................................................................5
Income statement for the period 31st Oct. 2020:.........................................................................6
Preparation of financial position 31st Oct. 2020:........................................................................6
PART B............................................................................................................................................7
Ratio calculation for Linda's business:........................................................................................7
Analysis of ratio analysis in comparison to its competitors:.......................................................8
CONCLUSION...............................................................................................................................9

INTRODUCTION
Accounting is systematic procedure which help in recording, measuring, collecting as
well as interpret business transaction. This report has been formulated to define how manager
use accounting applications for collecting, recording analysis and interpreting financial as well as
non financial data by formulating journal, ledger, trial balance and income statement. This
report also showcase relevance of financial ratio for measuring performance of Linda's
organization with its competitors.
PART A
Journal transactions of T- accounts:

Balance the accounts and an opening balances:

PART B
Ratio calculation for Linda's business

Analysis of ratio analysis in comparison to its competitors:
Financial ratio is a technique which included in financial management. Manager apply
this tool in order to measure performance of organization by evaluating relationship between
variable or items which is part of financial statements.
On the basis of measuring following ratio, performance of Linda's organization can be
evaluating.
Net profit ratio: This ratio has been calculated for the purpose of measuring and
analysing relation between net profit and sales. On the basis of calculating this ratio manager can
be recognizing rate of profitability for specific period of time. In this case Linda's rate of
profitability is measure at 10.26 % and industry ratio is valued at 31 %. Which recognize that as
compare with other companies ratio Linda's organization is not able to generate high level of
revenue (Bunea, Corbos and Popes cu, 2019).

Gross profit ratio: This ratio is also part of profitability ratio. By calculating gross profit
manager able to measure rate of return which organization attain before adjustment of any
operating expenses. In this case industry gross profit ratio was determined at 54 % and on the
other side Linda's organization able to attain 46.15 % of gross profit ratio. Which recognize that
Linda need to focus on formulate and implement those strategies which help in increase their
sales revenue in order to generate high rate of gross profit ratio.
Current ratio: By calculating current ratio manager able to measure the relation between
current asset with their current liabilities. Generally, organization needs to maintain ideal current
ratio which is 2 :1. In this case current ratio of Linda was measured at 4.62 and on the other side
industries ratio was recorded at 2.8. Which represent that Linda's organization’s current ratio is
more than ideal ratio, which showcase that its organization is not use their assets in effective
manner. Thus Linda need to use tools of managing assets which useful to maintain their ideal
current ratio (Kamaluddin, Ishak and Mohammed, 2019).
Quick ratio: This ratio is calculated for the purpose of measuring availability of having
liquid assets in order to fulfil short term debt liability. Quick ratio's calculated by dividing quick
assets with current liability. Linda's quick ratio was higher than other rival companies. Which
means that Linda have sufficient liquid assets for fulfilling their debt liabilities. Quick ratio is
useful in measuring the liquidity position of organization. Which will help in measuring
performance in effective manner. Higher ratios describe ability of manager to manage their
liquid business assets in order to fulfil day to day requirement of organization.
Account receivables ratio: It is part of efficiency ratio. On the basis of calculating
efficiency ratio manager able to determine ability of their organization to collect money from
their debtors. In this case Linda's organization took 37 days for collection of debt money from
debtors on the other side industries require 50 days. Which represent that Linda as compare to
other organizations more capable to collect money from debtors.
Account payable ratio: This ratio is calculated for the purpose of identified time required
to fulfil debt liability of creditors. In this case as compare to Linda's organization competitive
organization took less time to pay their debt liability Which represent that Linda need to use
those strategies which through which they can reduce time require for payment of debt liability.
On the basis of evaluating performance of Linda's organization, it recognized that, Linda need to
work on their managing financial business policies which will useful for her business. By

implementing tools of managing stock as well as current assets, she is able to manage her
organization's position in market by enhancing rate of revenue (Yadav and Kapoor, 2018).
CONCLUSION
From the above analysis it has been concluded that managers in order to maintain
sustainability of their organization in market,, need to use accounting application. By using
accounting applications manager able to record, analysis & measure their data in such way
through which they can evaluate financial performance for specific period of time. Manager on
the basis of calculating ratio can evaluate and measure financial position of organization with
their rival companies.

REFERENCESE
Books and journals
Bunea, O. I., Corbos, R. A. and Popescu, R. I., 2019. Influence of some financial indicators on
return on equity ratio in the Romanian energy sector-A competitive approach using a
DuPont-based analysis. Energy .189. p.116251.
Kamaluddin, A., Ishak, N. and Mohammed, N.F., 2019. Financial distress prediction through
cash flow ratios analysis. International Journal of Financial Research .10(3). pp.63-76.
Yadav, S. K. and Kapoor, R., 2018. Financial performance ranking of automotive companies in
India using TOPSIS method. International Journal of Business Excellence.16(2).
pp.149-161.