Recording Business Transactions

RECORDING BUSINESS
TRANSACTIONS

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
ASSESSMENT 1.............................................................................................................................1
PART 1............................................................................................................................................1
a) Decision makers in the above definition and their need for the accounting information........1
b) Identifying and explaining the advantages and disadvantages of the two profit business
structures which may be encountered by an accountant..............................................................2
PART 2............................................................................................................................................2
PART 3............................................................................................................................................3
PART 4............................................................................................................................................7
b) Impact of the COVID-19 on the income statement of company.............................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Financial accounting refers to the process of recording, analysing preparing and reporting
the business transactions through the financial statements. The financial accounting is very
essential for the business in preparing various reports and statements that present the financial
position and performance of the organisation. The financial statements prepared by the
organisations are balance sheet, income statement and cash flow statement. The present report
will reveal about the decision makers and the use of financial information by different users. It
will also provide about the advantages and disadvantages of the various profit making business
structure. Further it will also provide numerical example of accounting transactions.
ASSESSMENT 1
PART 1
Accounting has been described as ‘.. a system of recording information about a business. It
involves recording, analysing and summarising the transactions of an entity to provide
information for decision making.’
a) Decision makers in the above definition and their need for the accounting information
Accounting has been described as system used for recording all the business transactions
carried out during the year so that company for accounting all the income and expenses and
assessing whether the company has earned profits or suffered losses. Accounting information of
an large entity is used by the various users for decision making. These users are the people
interest in the company and its affairs (Andarwati, Nirwanto and Darsono, 2018)
. The various decision makers in the above definition are the management, shareholders,
creditors, customers, government bodies and many more.
The need for financial information is different for different users based on their interest in the
company.
Management – It requires the financial information of the company to assess the overall
performance and to identify whether the implemented policies and strategies have worked out
effectively in achieving the desired results or improvement is required. Based on the financial
information management plans its future strategies and policies to improve the profits and reduce
the costs.
1

Shareholders – They are the owners of the company and are interested in success or failure as
they have invested their money in the firm. They are concerned with getting higher returns over
their investments (Cohen and Karatzimas, 2017). They assess whether to invest in a company or
divest analysing the financial information showing its performance and position
Suppliers or creditors – They need the financial information to assess whether the company is
showing good performance and having enough liquidity and profits for paying off their dues.
This enables them to decide whether to continue their supplies or to stop the supplies if having
weak liquidity.
Government – They are interested in knowing whether company has made statutory compliance
regarding all the rules and regulations applicable to the entity and have made all the disclosures
required. It also whether company is paying proper taxes for the income earned during the year.
Therefore, there are different users of the financial information who use financial statements of
the company for decision making according to their interest in the in company.
b) Identifying and explaining the advantages and disadvantages of the two profit business
structures which may be encountered by an accountant.
Advantages of the accounting
The accounting is very essential tool that is used for recording the business transactions.
It allows the accountant to keep record of all the transactions carried out by the business. it could
keep record of all the cash and non cash transactions related to the business. The recording of all
the transactions help in summarising them into separate accounts and then to final reports and
statements that allow the accountant to assess the over all results of the business carried out
during the year (Rahmi, Sari and Wulandari, 2019). Accountant could assess the cost and
expenses that have consumed considerable amount of cost of the company so that it could report
to management who will take considerable steps for controlling the costs and expenditures.
Another advantage is that it allows the accountant to compare the results of the company
over the years with its own results or with other competitors. Comparison is very essential to
measure the growth of the business achieved during the current structure. Accountant could
assess what items have increased or decreased in comparison with previous years. It also helps in
complying with various statutory requirements by making proper accounting records.
Disadvantages of accounting
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