Recording Business Transactions

This document provides an overview of recording business transactions and its impact on financial performance. It discusses the role of decision makers and the advantages and disadvantages of accounting. The document also includes journal entries, ledger entries, and trial balance examples. Additionally, it explores the income statement of Airman Company and the impact of COVID-19 on its financial performance.

Recording Business Transactions

Table of Contents
INTRODUCTION...........................................................................................................................3
ASSESSMENT 1.............................................................................................................................3
PART 1............................................................................................................................................3
a) Brief explanation of who are the decision makers and their relevance for accounting
information..................................................................................................................................3
b) Advantage & disadvantages of accounting ............................................................................4
PART 2............................................................................................................................................5
Journal entries.............................................................................................................................5
PART 3............................................................................................................................................7
Journal entries and ledger of Pearce & Sons...............................................................................7
Trial balance of Pearce & Sons...................................................................................................9
PART 4............................................................................................................................................9
Income statement of Airman Company......................................................................................9
Impact of COVID – 19 on income statement of Airman Company........................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Accounting is field of study which define how data collect measure and interpret in
systematic manner. In order to understand relevance of accounting, this report has been
formulated. It includes how manager use data in order to record, measure and analysis business
transaction by formulating journal, ledger trial balance and income statement. This report also
define how COVID – 19 impacted on the financial performance of Airman Company by
analysing their income statement.
ASSESSMENT 1
PART 1
a) Brief explanation of who are the decision makers and their relevance for accounting
information.
Accounting is used for the purpose of recording and analysing business transactions. It is
essential and vital application of management which will help in effectively operate business.
Accounting information is useful in decision making purpose. In context with Tesco, cost
accountant, CEO, finance manager and auditor all theses are use accounting information for the
purpose of decision making. Cost accountant supervise all the transaction, record in systematic
and effective manner.
They on the basis of that recognize volume of profits and recognize those activities which
may become the reason of charging extra cost. On the basis of that they took decision regarding
apply those tools through which they can able to cut those activities which are the main cause of
incurring additional cost (Choudhary, Virmani and Juneja, 2020).
Finance manager use basic accounting information as these provides base for formulation
of financial statements. They use accounting information for present theses data in effective
manner to attract their internal as well as external stockholder.
Finance manage take decision on the basis of summarising and supervising their
accounting and financial statements and take decision for future business strategies which help
in attaining long term business goals. As well as these accounting information help in finding out
which alternative is beneficial for run further business activities.
CEO of Tesco use accounting information for measuring their reviews performance of
business and auditors also use information and data collected from accounting procedure. They

use these data for the purpose of reviewing and finding any error arises during the time of
recording business transactions and formulating financial statement.
They use accounting data for cross check and auditing adjustment and entries in order to
control illegal business activities. Auditors take decision by supervising accounting data related
with whether organization formulate their statement on the basis of using norms of accounting
standard or not. They use accounting information in order to prevent from any illegal activities
and useful as legal evidence for company.
b) Advantage & disadvantages of accounting
Accounting help in operate business in systematic manner. Following are the benefits and
drawbacks of accounting.
Benefits
 Maintain business record: Accounting information is useful in order to maintain record
of each and every small activity detail. Theses detail a act as legal evidence during the
time of auditing procedure. Maintaining systematic record help in save time and cost rat
the time of disputes.
 Help in forecasting: Business organizations use accounting information in order to
determine their financial performance. On the basis of recording data manager able to
formulate their budget. They use accounting information for the purpose of forecasting .
Manager use accounting information as it provides base for formulate financial report as
well as help in analysis and forecasting future business performance.
 Prevent business fraud: Manager use theses application in their organization in order to
control issue related with fraud or corruption as with the changing of time scenario rate
of cyber crime and insider money lending has been increase thus in order to control all
these issue manager use accounting application for recording and maintaining their
business transactions (Mirza Naqvi Rahat and Rizvi, 2020).
 Useful in calculating tax liabilities: Manager use accounting application in order to
calculate the real value of their tax liability and on the basis of that they pay tax. This will
help in reduce case related with evasion of taxes. Manager on the basis of using proper
accounting statement able to take advantage which government provide and offer to those
tax payer who fulfil their tax liability with the given time period.

 Help in decision making: Accounting is useful in take essential business decision. On
the basis of analysing trial balance and income statement manager measure financial
performance with rival company. On the basis of that they recognize their position in
market and formulate those strategies which useful enhance financial performance and
organization able to attain competitive business advantage. Accounting information help
in finding out which alternative is much beneficial for run future business activities.
Drawbacks
 Accounts can be manipulated: It is not essential that the information provides by
accountant are accurate and reliable as it is totally depend on accountants they may be
manipulate accounts in order to make secret profits.
 Require skilled personal: For maintain accounting record an formulate financial
statements, manage need to hire skilled personal who have knowledge and degree related
in accounting field.
 Highly expensive for small business: Hiring accountant is expensive for small business
organizations. As auditor, and cost accountant took high fees in order to manage
accounting information of company. It is not possible for small organizations to hire
accountant for the purpose of maintain their day to day records (Ruan,Yan Dong, Zheng
and Qian 2019).
 Ignorance of qualitative elements: This is consider as major drawback of accounting.
As it only consider qualitative terms. Which can be measurable. Measuring performance
of organization on the basis of using numerical data is not always clear picture of
organization.
PART 2
Journal entries
Asma Limited 350
To purchase return 350
( Being office fixtures return to
supplier.)

Asma Limited 350
Bed debts 85
To S. Keyes 85
( Being bed debts written )
Machine a/c 2300
To Bank a/c 200
To TS. Company 2100
( Being machinery purchase,
2100 on credit basis and check
paid for the remaining
amount)
Bank 220
To bed debt recovered 220
( Being bed debts recovered
from S.Hill)
Bed debts 50
To Profit and Loss a/c 50
( Being loss on recovery of bed
debts)
Drawing 180
To stock 180
( Being goods use for personal
purpose)
Drawing 85

Asma Limited 350
To bank 85
( Being insurance premium
used for personal purpose not
recorded correctly in the
books of account)
TS. Company 1050
To Bank a/c 1050
(Being check paid for debt
amount of purchasing
machinery)
PART 3
Journal entries and ledger of Pearce & Sons.
Date Particulars Amounts Date Details Amounts
01/02/20 By bank A/c 21500
01/02/20 By office
fixture A/c
800
01/02/20 By Van A/c 2500
29/02/20 To balance c/f 47300
Total 4300 Total 4300
Bank Account
Date Particulars Amounts Date Details Amounts
03/02/20 By cash A/c 1500 01/02/20 To capital A/c 21500

Date Particulars Amounts Date Details Amounts
04/02/20 By Van A/c 4800 02/02/20 To Loan A/c 2500
19/02/20 By Nissan
company A/c
5200 25/02/20 To cash A/c 350
28/02/20 By balance c/f 12230
Total 24350 Total 24350
Van Account
Date Particulars Amounts Date Details Amounts
01/02/20 To capital A/c 2500
04/02/20 To bank A/c 4800
08/02/20 To Nissan
company A/c
5200
29/02/20 By balance c/f 35000
Total 35000 Total 35000
Quick office
Ltd Account
Date Particulars Amounts Date Details Amounts
05/02/20 By office
fixture A/c
1100
29/02/20 To balance c/f 1100
Total 1100 Total 1100
Cash Account

Date Particulars Amounts Date Details Amounts
Date Particulars Amounts Date Details Amounts
15/02/20 By Office
Fixture A/c
70 03/02/20 To bank A/c 1500
25/02/20 By bank A/c 350
29/02/20 By balance c/f 1080
Total 1500 Total 1500
Nissan
company
Account
Date Particulars Amounts Date Details Amounts
08/02/20 By van A/c 5200 19/02/20 To bank A/c 5200
Total 5200 Total 5200
Office Fixture
Account
Date Particulars Amounts Date Details Amounts
01/02/20 To Capital A/c 800
05/02/20 To Quick
Office Ltd A/c
1100
15/02/20 To Cash A/c 70
28/02/20 To Bank A/c 620
29/02/20 By Balance c/f 2590
Total 2590 Total 2590

Date Particulars Amounts Date Details Amounts
Loan Account
Date Particulars Amounts Date Details Amounts
02/02/20 By Bank A/c 2500
29/02/20 By Balance c/f 2500
Total 2500 Total 2500
Trial balance of Pearce & Sons.
Details Debit Credit
Capital account 47300
Cash account 1080
Van account 35000
Bank account 12230
Quick office Ltd. Account 1100
Office fixture account 2590
Loan account 2500
Total 50900 50900
PART 4
Income statement of Airman Company.
Income Statement of Airman
Company
Particular Amount Amount
( A) Revenue 80000

Income Statement of Airman
Company
Less: Sales return 2000
Ne revenue 78000
Closing stock 120000 198000
Less: Cost of goods sold
Opening stock 36000
Purchase ( Less purchase
return)
149400
Carriage inward 720
Total cost of goods sold 186120
(B) Gross profit 11880
c) Operating expenses
Carriage Outwards 400
Motor Expenses 1200
Rent 5000
Telephone Charges 620
Wages and Salaries 32000
Insurance 830
Office Expenses 600
Sundry Expenses 300 40950
Net loss (B- C) -29070

Impact of COVID – 19 on income statement of Airman Company.
Business organizations in order to maintain their posti9on in competitive market, require
to have sufficient financial capital. Which will further require for them to spread their business
market. Airman Company run their business in effective manner till 2019, they have sufficient
capital balance and their profitability ratio is also as comparability high from other rival business
organizations. Airman company run their business operation in effective manner but COVID –
19 directly impact on the performance of this organization.
Due to the pandemic period financial market goes down. On the basis of analysing
income statement of Airman Company it is recognized that rate of profit has been decrease as
organization not able to generate profit this year. Their profitability balance goes negatively
down. The company face loss of 29070 which will directly impacted on the financial
performance of this organization (Schmidt and Wagner, 2019).
Due to the policies imposed by government regarding this pandemic, organization not
able to maintain its position in market. Due to the negative impact of COVID – 19 pandemic
Airman Company not able to sale their product this year as compare to previous year sales as
well as they need to bear expenses of maintenance, paid salaries to their employee , expenses
related with insurance and maintain of assets theses directly impacted on their profitability rate.
Which will be the main cause of reduction in profit rate of organization. This pandemic period
will directly lead toward the performance of business entities as they are not capable of sell their
units (He, Sun, Zhang and Li, 2020).
Organization face problem related with managing their business operations they suffer
from issue arise within the organization related with internal coherence , lack of communication,
mismanagement all these issue company face during lock down period. COVID – 19 directly
impact on the ability of organizations generating revenue. Organization not able to maintain their
position in market which directly effect on the goodwill of business corporation within the
market.
Airman Company not able to generate profit as they bear high loss due to non payment of
their tax liability. Which will directly impacted on their financial performance. Organization not
able to maintain their profitability and well as current ratio. COVID – 19 negativity impact on
the overall performance of this organization due to this management department of Airman
Company face unexpected situations which directly lead negative Balance of organization.

CONCLUSION
From the above analysis it has been concluded that accounting play vital role in the field
of management. Manager use journals and ledger in order to record their data as well as on the
basis of data recorded in trial balance they able to formulate income and other financial
statements which will useful for them to take business decision. They can recognize or measure
performance of their organization. Which will further useful to formulate those strategies which
help in overcome the impact of COVID – 19 as due to this pandemic profitability rate and
performance of organization goes down. Thus on the basis of using accounting in systematic
way manage can overcome loss arises during the pandemic period.
REFERENCES
Choudhary, T., Virmani, C. and Juneja, D., 2020. Convergence of Blockchain and IoT: An Edge
Over Technologies. In Toward Social Internet of Things (SIoT): Enabling Technologies,
Architectures and Applications (pp. 299-316). Springer, Cham.
Mirza, N., Naqvi, B., Rahat, B. and Rizvi, S. K. A., 2020. Price reaction, volatility timing and
funds’ performance during Covid-19. Finance Research Letters. 36. p.101657.
Ruan, J., Yan, Z., Dong, B., Zheng, Q. and Qian, B., 2019. Identifying suspicious groups of
affiliated-transaction-based tax evasion in big data. Information Sciences.477. pp.508-
532.
Schmidt, C. G. and Wagner, S. M., 2019. Blockchain and supply chain relations: A transaction
cost theory perspective. Journal of Purchasing and Supply Management. 25(4).
p.100552.
He, P., Sun, Y., Zhang, Y. and Li, T., 2020. COVID–19’s impact on stock prices across different
sectors—An event study based on the Chinese stock market. Emerging Markets Finance
and Trade. 56(10). pp.2198-2212.