Recording Business Transactions - Portfolio 1

This portfolio discusses the user and decision maker of accounting information, advantages and limitations for accountants, journal entries, trial balance, making profit and loss account, and analyzing the impact of COVID-19 on the income statement of the company.

RECORDING BUSINESS
TRANSACTIONS-
PORTFOLIO 1

Table of Contents
PORTFOLIO 1.................................................................................................................................3
PART 1............................................................................................................................................3
a User and decision maker of accounting information................................................................3
b. Advantages and limitation for accountant...............................................................................3
PART 2............................................................................................................................................5
Journal entries.............................................................................................................................5
PART 3............................................................................................................................................6
Journal entries.............................................................................................................................6
Trial balance................................................................................................................................9
PART 4..........................................................................................................................................10
a Making profit and loss account..............................................................................................10
b Analysing the impact of COVID 19 over income statement of the company.......................10
REFERENCES..............................................................................................................................13

PORTFOLIO 1
PART 1
a User and decision maker of accounting information
With reference to the definition of accounting it is clear that decision maker plays an
important role in the effective use of the accounting information. The major decision makers of
Sainsbury are the owners, shareholders, investors, government and other related stakeholders of
company (Fischer-Pauzenberger and Schwaiger, 2017). Thus, for making the decision of the
company effective the most important thing is the use of accounting information. The major
reason for this is that the accounting information contains all the information relating to company
and if decision makes of Sainsbury will not take this information into account then this will not
lead to development of the company. In Sainsbury the government is also a decision maker as
they decide for the amount of tax which the company need to pay over the income earned by the
company. The government of country is keen in knowing the profitability of company as if the
profitability of company will be good then this will increase income of government and due to
this reason the government is a major decision maker.
Further in addition to the government, the investor is also a type of decision maker which
makes the use of the accounting information and takes decision. The investors use the accounting
information in order to analyse the profitability of the company in order to know the fact that
how much of the return is provided to the investors of the company. The major reason is that the
investors has to decide that whether they will get good returns or not.
In addition to this the another major user of the accounting information is the owner and
they require the accounting information as they have to make the strategies in order to increase
the profits of the company. Thus, with the help of the accounting information the owner will
come to know that what are the profits remaining after paying all the expenses and dividend to
shareholders. Thus, they can make strategies as how they have to use the remaining profits and if
there is loss then how they can convert the loss.

b. Advantages and limitation for accountant
The sole trader is a form of business in which there is a single owner who takes up all the
risk and enjoys all the profits being earned by the company. Under this there is not much
involvement of any of the person unless the sole trader involves the person into the business.
the major benefit of the sole trader is that all the profits are of the owner only and they do not
have to share with any person. Further another major benefit is that in decision making there is
not any involvement of the people and this makes the decision making process very fast and
effective.
On the other side the major drawback of the Sole trading business is that if there is heavy
loss then also the owner has to bear on their own as there is no other partner. in addition to this
another major drawback is that the liability of owner is unlimited.
Further another form of business is that partnership in which two or more people comes
together and start the business by dividing all the responsibilities among them in equal propotion
or as agreed by them.
The major benefit of the partnership is that there is sharing of all the profit and loss and
this is helpful at time of liability as it of all the partners.
Further another major benefit here is that the accountant knows that the profit need to be
divided in the ratio specified by the partners. Thus, this is clear for the accountant that they have
to divide the profit or loss in the same ratio in which partners brought their capital.
Further the major drawback of this method is that all the partners have an unlimited
liability as both the company and owners are same for the business (Advantages and
disadvantages of a partnership business. 2017).
In addition to this another major drawback for the accountant in the partnership firm is
that the accountant sometime might stuck in the recording of transaction as the accounting
involves only the financial transaction that is the transaction which involves money in it. Further
any other transaction is not involved in the working of the company.

PART 2
Journal entries

PART 3
Journal entries
Ledger

Trial balance

PART 4
a Making profit and loss account
As per the analysis of the above table of profit and loss account it is clear that currently
company is suffering from loss and because of this the working capacity of company has
reduced. The major reason underlying the decrease in profit and increase in loss is that the
indirect expenses of company have increased to a great extent. Thus, for reducing the expense
the company need to focus on increasing sales by doing effective marketing.
b Analysing the impact of COVID 19 over income statement of the company
The current pandemic has made a great deal of effect over the organization and the
working of the company in the competitive market. The significant explanation behind this is
that there were numerous progressions occurring in the economy of the nation in light of the

pandemic COVID 19. The company is operating in the external environment which is not at all
stable and is always changing and dynamic and this has a great impact over the profitability of
the company. This is particularly due to the reason that when the company will not adapt to this
then it might be possible that performance of company degraded to a great extent. These
progressions are as per the following-
Political factor- in the situation of current COVID 19 the government and regulatory
body has expanded restrictions and limitation on the trading between nations. Consequently, as a
result of there has been an extraordinary negative effect over the income statement of company
as trade has reduced.
Economic factor- this factors relates with the changes taking place in economy of country
with respect to the current pandemic. Due to the effects of COVID 19 there is a long pause in the
business and the economy and this has brought about a decrease in the business working and
operations. As a result of this there is a decreasing trend in the income statement of company and
this had a negative effect over the operation of organization.
Social factor- this is additionally a central point which has an incredible effect over the
working of the organization and the income earned by the company. In relation with the current
pandemic the consumers have changed their purchasing habit and behaviour and this had a lot of
effect over the working and profits of organization (Duţescu, 2019). Because of the current
pandemic the sales of organization have diminished which brought about the decline in the profit
and income of organization.
Technological factor- Innovation in technology is a factor which includes the updation in
occurring in field of technology. Concerning the current pandemic there is additionally an
incredible effect over the working of the organizations. Accordingly, concerning the current
pandemic the use of innovation has diminished the limit of organization to deliver and this
diminished the benefits of the organization.
Environmental factor- environment is another central point which affects the working of
the organization and the profits of the organization generally. The significant purpose behind this
is that because of the current pandemic the buyer has become more clean and cognizant
identifying with their wellbeing and security. Hence, for this organization needs to expand the
interest and invest more in the strategies which will build the natural assurance and this will
expand cost of the organization.

Legal factor- business need to be lawful because of the current pandemic the government
has increased a lot of laws and rules and guideline identifying with assurance to the
representatives and the workplace of the organization. Accordingly, for this too the organization
has expanded the consistency with laws and different principles and guideline relevant to the
organization (Dewangan and Ikhar, 2018). Subsequently, for this the company needs to recruit a
few people who will consistently work in examining the new changes occurring in legitimate
area and attempting to apply it to them and ensure that the organization sticks to these laws in a
similar expected way.
In the end it can be said that the any change in the external environment can lead to
impact over the income and profitability of the company. The major reason for this is that the
company operates in the environment which is very dynamic and ever changing and thus because
of this reason it is important for the company to adapt all these changes in effective and efficient
manner.

REFERENCES
Books and Journals
Dewangan, S. and Ikhar, M.K., 2018. ROLE OF ETHICS AND GOVERNANCE IN THE
ACCOUNTING PRACTICES IN PRESENT INDIAN BUSINESSES WITH SPECIAL
REFERENCE TO SATYAM SCANDAL. Indian Journal of Scientific Research, pp.33-
38.
Duţescu, A., 2019. Accounting Process and Transaction Analysis. In Financial Accounting (pp.
63-92). Palgrave Macmillan, Cham.
Fischer-Pauzenberger, C. and Schwaiger, W.S., 2017. The OntoREA Accounting Model:
Ontology-based Modeling of the Accounting Domain. CSIMQ, 11, pp.20-37.
Werner, M., 2017. Financial process mining-Accounting data structure dependent control flow
inference. International Journal of Accounting Information Systems, 25, pp.57-80.
Online
Advantages and disadvantages of a partnership business. 2017. [Online]. avaialbe through: <
https://www.informdirect.co.uk/business-management/partnership-business-advantages-
and-disadvantages/>