Recording Business Transactions (Portfolio 2)

Recording Business
Transactions
(Portfolio 2)

Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
a. Recording journal entries of business:.....................................................................................3
b. Preparing company's ledger accounts:.....................................................................................5
c. Extraction of Trial Balance:.....................................................................................................7
d. Preparing Income Statement for year ending 31st October 2020:...........................................8
e. Preparation of Financial statement:..........................................................................................8
f. Writing brief letter to Linda in relevance to drawing:..............................................................9
PART B..........................................................................................................................................10
a. Calculation of financial ratios:...............................................................................................10
Working note:............................................................................................................................10
b. Interpretation and comparison of ratio analysis:....................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Recording business transactions indicates noting, summarising or reporting business
transactions in terms of money (Kamburova, 2020). While considering characteristics of
business transactions it can be noted that it is a requirement for transactions in relevance to
business to entitle support of some source document , for example sales invoice, receipt etc. and
it is necessary for them to pertain two fold effect (Lessambo, 2018).
This report evaluates financial information of Linda's business and interprets it to gain
knowledge about financial health of company. In this report, journal entries of Linda's business
is recorded. Further, its ledger, trial balance and income statement is prepared. Motive is to
compute its ratio analysis and identify its financial position in comparison to competitors.
PART A
a. Recording journal entries of business:
Journal Entries of Linda's Business
Date Particulars L.F Dr. Cr.
01.10.20 Van... a/c..... Dr. 3,000
Cash a/c..... Dr. 5,200
Bank a/c...... Dr. 8,000
To Capital..... a/c...... 16,200
(Made capital investment in company)
02.10.20 Laptop a/c...... Dr. 1,000
To.... Bank..... a/c...... 1,000
(purchase of laptop )
04.10.20 Purchase..... a/c...... Dr. 2,450

To...Toys.... Ltd... a/c... 2,450
(Purchase of goods from Toy Ltd.)
05.10.20 Bank..... a/c..... Dr. 1,500
To .....Sales..... a/c....... 1,500
(Sold goods and receive amount through
bank)
12.10.20 Repair.... a/c.... Dr. 80
To Cash a/c 80
(paid cash for repair of laptop)
18.10.20 Toys..... Ltd.... a/c...... Dr. 100
To.... Purchase... Return... a/c... 100
(purchase returned)
21.10.20 Bank... a/c.... Dr. 500
To.... Rent..... a/c..... 500
(received rent by cheque)
23.10.20 Fred.... a/c..... Dr. 400
Cash...... a/c...... Dr. 1,500
To..... Sales..... a/c...... 1,900
(Goods sold)