Recording Business Transactions Project2

This report covers journal entries, ledger accounts, trial balance, income statement, balance sheet, letter writing, ratio calculation, and financial performance evaluation for a specified firm.

RECORDING BUSINESS
TRANSACTIONS
PROJECT2

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
a) Journal entries..........................................................................................................................1
b) ledger account..........................................................................................................................1
c) Preparing Trial balance as at 31st October 2021...................................................................12
d) Illustrating Income Statement for the period ended 31st October 2021................................13
e) Formulating balance sheet....................................................................................................14
f) Preparing letter for Anne........................................................................................................16
PART B.........................................................................................................................................17
a) Calculation of ratios...............................................................................................................17
b) Evaluating performance of company and assessing impact of covid 19..............................20
CONCLUSION..............................................................................................................................22
REFERENCES..............................................................................................................................23
APPENDIX....................................................................................................................................23

INTRODUCTION
Recording business transaction is associated with paying attention on having summarized
data regarding organizational activities related to financial practices. In current era, there are
several actions which are required to be taken into consideration for gaining crucial information
to formulate sound decision. The current report will highlight the essential type of activities that
aids in attaining required level of details so that appropriate decision can be made. The present
report
PART A
a) Journal entries
Enclosed in appendix
b) ledger account
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c) Preparing Trial balance as at 31st October 2021
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d) Illustrating Income Statement for the period ended 31st October 2021
From the assessment of above illustrated income statement, it can be specified that
there are several expenses which are incurred by the firm for gaining the ability to offer goods
to customer. It has involved both direct & indirect expenditure which can allow to sustain in
sector so that higher productiveness action are taken. The present study has obtained that there is
less ability to generate profitability which is incurring loss to firm. On the basis of this, it can be
interpreted that firm is facing losses which are needed to be improved to gain profitability and
stability.
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e) Formulating balance sheet
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On the basis of current evaluation regarding balance sheet it can be specified that preset
financial performance of company is effective. The current year balance sheet has been prepared
by following the accounting equation. This refers to total assets equals to liabilities plus equities.
The present frim has good current ability to overcome the short term liabilities which is positive
indicator of growth & development. There is good presence of financial condition as low debts
are shown. It can be interpreted that company is performing effective but require certain
changes to eliminate irrelevant aspect.
f) Preparing letter for Anne
To Anne
Subject: concern for the withdrawal which is hampering performance of business
In the recent business environment, there are several components which are required to be his
highlighted by the business in turn significant business decision can be made. There are various
types of factors that has potential of influencing the growth & development of company. In order
to become successful, management of the organization focus on evaluating which are the crucial
and non-relevant aspect influencing the functioning of company. The current performance of the
company is performing less effective which is required to be improved. From the evaluation of
income and financial statement of the company it can be analysed that current reflected business
is having several lacking areas. The one of the significant cause that is essential to highlight in
order to present the one of the crucial factor that is hampering liquidity and profitability (Spiteri,
2020). It can be justified that in the current year organization has experienced loss due to the
miss management of possessing resources. There is presence of irrelevant expense such as
withdrawing part of capital for personal development. it is declining the capital of the company
which is highly influencing the liquidity position of the business.
From the assessment of the income statement it can be ensured that there are various
expenditure which are incurred by the company for carrying forward the operational activities.
There is ineffectiveness in managing practices of firm to careless behaviour of the management
that is needed to be improved. The main reason that is resulting into the lack of performance of
the company is inaccurate planning, allocation and monitoring of business that is required to be
modified. There is inefficiency is ensuring that optimum utilization of resources which has
influenced the functioning of company. In order to be successful, firm should give emphasis on
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evaluating irrelevant practice such as using organizational financial resources for personal
expenses. For this purpose, company should focus on proper implementation of activities that is
crucial and can be productive for the development of company. In addition to this, firm should
highlight elements that are non-essential and relevant in respect to develop approach of the
growth & development. The main reason of which enterprise is needed to concentrate on
having proper execution of activities is inclining level of competition (Imhof, Seavey and
Watanabe, 2022). There is higher requirement to gain competitiveness in respect to manage &
optimization of resources in turn greater ability to accomplish objectives can become possible.
On the basis of this, it is interpreted that firm need to improve the current way to managing the
operational activities so that higher productiveness so that achieving objective can become
possible. It will help in achieving the organizational objective of stabilizing business to lead
higher ability to meet business objective.
PART B
a) Calculation of ratios
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Ratios analysis is one of the widley used technique that is taken into process for
evaluating the different kinds of objectives suh as investing, credibility and efficiecy. For this
purpose, net, gross profitability, current , quick ratios, trade recievable and payble ratios has
been estimated to get the significant information about the fiancial condition of specified
organiztaion.
b) Evaluating performance of company and assessing impact of covid 19
It is important for the company to present its financial information in accurate manner so
that positive influence on stakeholders can be provided. The stakeholders who are interested in
the performance of company is creditors, investors, debtors, financial institutions, competitors,
etc. so that strategic decision can be made (Thottoli, 2020).
From the evaluation of profitability ratio, it can be specified that current performance of
firm is effective in terms of generating profits and maintaining good margin. Gross profit is one
of the crucial ratio that is helpful in assessing how cost of goods sold is managing to have good
margin. From the evaluation of current performance of particular ratio it can be specified that
there is 14% which is higher than competitors average. It is reflecting that company is having
greater ability to decline cost of goods sold when compared to the similar organization operating
in sector. Net profit is major metric of reflecting organizational performance in terms of
generating profitability margin by making higher revenue. From the calculation, it can be
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mentioned that net profitability of company is -4% that is found to be lower than particular
specified competitor’s outcome. There is need to have ineffective ability to achieve the
profitability to meet the organizational objectives.
There are several forms of ratios, liquidity ratios play major aspect to deal with
ascertaining capability of firm to deal with prevailing shot term liabilities. The stakeholders like
creditors, financial institutions suppliers, etc. so that higher productive decision can be made.
Current ratio is helpful in evaluating how effective company is managing resources to overcome
liabilities occurred for shorter period the derived result from the assessment of computed figure
it can be specified that 3.08 times possessing current assets when compared to the specified
competitors. On the basis of this, it can be mentioned that Anne’s business is functioning
effectively in terms of paying off h prevailing liabilities. Quick ratio is helpful in estimating cash
& equivalent resources utilization to deal with current liabilities (Selamat and Ngalim, 2021).
From the analysis of determined figure regarding quick ratio it can be mentioned that the
company is having 3.014 times. It is not less than mentioned outcome of competitors, it can be
interpreted that company is having effective performance which is making capable to deal with
prevailing complexity of business.
From the assessment of trade receivable result derived from the determination of ratios it
can be specified that firm takes 10 days to collect the payments from the customers in respect to
achieve higher liquidity position. When the derived result is compared to average of
competitors’ performance it can be mentioned that firm is having effectual results. It is
considered to be favourable sign of growth & development (Ulfah and et.al., 2020). The
presented outcome regarding creditors performance it can be articulated that Anne’s business
takes 365 days to pay off for the goods buying on credit which is reflecting ineffective
performance. This ratio is helpful in estimating the credibility & trustworthiness of market so
that relevant decision can be made. On the basis given information regarding six mentioned
ratios which provides assistance in having effectual information to compare & obtain ability to
reach position to make strategic decision. On the basis of this, it can be mentioned that
particular firm is having good financial position.
Covid 19 has been identified that one of the negative situation influencing functioning of
business by affecting factors of production and other component affecting business. From the
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analysis of given information, it can be mentioned that particular company is performing well
and not being affected from pandemic situation.
CONCLUSION
From the above report it can be concluded that there are various type of transaction
which are required to be recorded in respect to have depth understanding of financial
performance, recording business transaction becomes important. The current report has
comprised information related to journal entries, ledge, trial balance, income and financial
position. It has given emphasis on writing letter for showing concern about withdrawal in turn
better decision can be made. Present report has involve calculation of ratios and evaluation of
financial performance of specified firm.
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REFERENCES
Books and Journals
Imhof, M. J., Seavey, S. E. and Watanabe, O. V., 2022. Competition, proprietary costs of
financial reporting, and financial statement comparability. Journal of Accounting,
Auditing & Finance. 37(1). pp.114-142.
Selamat, A.I. and Ngalim, S.M., 2021. Putra Salamanis board game: the game of bookkeeping
for fundamental financial accounting learning. Accounting Education. pp.1-19.
Spiteri, S., 2020. Financial Accounting: From Its Basics to Financial Reporting and Analysis.
Cambridge Scholars Publishing.
Thottoli, M. M., 2020. Knowledge and use of accounting software: evidence from
Oman. Journal of Industry-University Collaboration.
Ulfah, A.K and et.al., 2020. Accounting Equations in Business Transactions. Psychology and
Education Journal. 57(8). pp.456-460.
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APPENDIX
Journal entry
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