Comprehensive Accounting Report: Journal Entries to Ratio Analysis

This accounting report provides a detailed analysis of business transactions, starting with journal entries and their posting to respective ledger accounts. A trial balance is prepared to ensure accuracy, followed by the construction of an income statement to determine the business's profitability and a balance sheet to present its assets and liabilities. The report also includes an interpretation of key accounting ratios to assess the company's financial health and compare it with competitors. Furthermore, it discusses the impact of events like COVID-19 on the business's profitability, emphasizing the need for adaptation and resilience in dynamic market conditions. The report concludes that maintaining accurate financial records is crucial for informed decision-making and provides valuable insights for both internal and external stakeholders.

Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Recording of transactions in the Journal-...............................................................................1
Recording entries in respective ledgers-.................................................................................3
Posting in the trial balance.....................................................................................................6
Construct the Income Statement.............................................................................................7
Provide details of the Balance Sheet......................................................................................7
Explaining drawings in case of Anne.....................................................................................8
TASK 2 ...........................................................................................................................................9
Determine the Accounting Ratios of the Business.................................................................9
Impact of Covid19 on profits of the business-.......................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES .............................................................................................................................11

INTRODUCTION
Business transaction represents all the activities which can be recorded in form of money and can
be valued. These transactions acknowledge about the liquidity,profitability and structure of
business (Appelbaum and Nehmer, 2020).This report contains journal entries and their posting to
respective accounts. For checking accuracy trial balance is also recorded in which all the
accounts having debit or credit balances are shown. Afterwards,profit and loss account is
prepared to know the expenses and income of the business and with the help of all statements
balance sheet is prepared to know about the real assets and liabilities of the given organisation.
Lastly,ratios are also interpreted for its comparison with other competitors.
TASK 1
Recording of transactions in the Journal-
Journal entries in the books of Anne york.
Date Particular L.F. Debit(Dr.) Credit(Cr.)
1st October Bank
cash
flat
car
capital
(Capital introduced in the business)
10000
4800
45000
12000
71800
2nd October Purchases
Home limited.
(Purchases made from home limited)
5400
5400
4th October Computer
Printer
Bank
(
800
200
1000
5th October Bank 2800
1

Sales
(sales payment received by cheque)
2800
12th October Repairs
cash
(expense of 110 for repairs)
110
110
18th October Home limited
Purchase return
(return of purchases from home
limited)
250
250
21st October Bank
Rent received
(Rent received of amount 800)
800
800
23rd October Rayan
cash
Sales
(goods being sold on cash and
credit)
300
1800
2100
23rd October Cash
sales
(Cash sales to David)
700
700
24th October Laptop
Bank
(laptop purchased)
1700
1700
26th October Wages
Bank
(Monthly wages paid by cheque)
820
820
30th October Rent 850
2

Bank
(Rent paid by cheque)
850
31st October Drawings
Bank
(Withdrawn 1200 for personal use)
1200
1200
31st October Cash
Rayan
(Cash received from Rayan )
150
150
Recording entries in respective ledgers-
Ledger account
Capital account
Date Particular J.F Amount Date Particular J.f. Amount
1st
October
Balance b/d 71800 1st
Octobe
r
Bank 10000
Cash 4800
Flat 45000
Car 12000
Bank account
Date Particular JF Amount Date Particular JF Amount
1st Oct Balance b/d 10000 4th Oct Computer 800
5th Oct Sales 2800 4th Oct Printer 200
21st Oct Rent received 800 24th Oct Laptop 1700
26th Oct Wages 820
30th Oct Rent 850
3

31st Oct Drawings 1200
30th
septem
ber
Balance c/d 8030
Cash account
Date Particular JF Amount Date Particular JF Amount
1st Oct Balance b/d 4800 12th Oct Repairs 110
23rd Oct sales 700 3oth
September
Balance c/d 7340
23rd Oct Sales 1800
31st Oct Rayan 150
Balance b/d 7340
Flat account
Date Particular Amount Date Particular Amount
1st October Balance b/d 45000 30th
September
Balance c/d 45000
Balance b/d 45000
Car account
Date Particular Amount Date Particular Amount
1st October Balance b/d 12000 30th
September
Balance c/d 12000
Balance b/d 12000
Purchases account
Date Particular Amount Date Particular Amount
4

2nd
October
Home limited 5400 Balance c/d 5400
Balance b/d 5400
Home limited
Date Particular Amount Date Particular Amount
18th
October
Purchase return 250 2nd
October
Home limited 5400
Balance c/d 5150
Balance b/d 5150
Sales account
Date Particular Amount Date Particular Amount
Balance c/d 5600 5th
October
bank 2800
23rd
October
cash 1800
23rd
October
Rayan 300
23rd
October
cash 700
Balance b/d 5600
Computer account
Date Particular Amount Date Particular Amount
4th
October
Bank 800 Balance b/d 800
Balance c/d 800
Printer account
5

Date Particular Amount Date Particular Amount
4th
October
Bank 200 Balance b/d 200
Balance c/d 200
Repairs account
Date Particular Amount Date Particular Amount
12th oct cash 110 Balance b/d 110
Balance c/d 110
Purchase return account
Date Particular Amount Date Particular Amount
Balance b/d 250 18th
October
Home limited 250
Balance c/d 250
Rent received
Date Particular Amount Date Particular Amount
Balance b/d 800 21st
October
Bank 800
Balance c/d 800
Rayan account
Date Particular Amount Date Particular Amount
23rd
October
sales 300 31st
October
Cash 150
Balance b/d 150
6

Balance c/d 150
Laptop account
Date Particular Amount Date Particular Amount
24th
October
bank 1700 Balance b/d 1700
Balance c/d 1700
Wages account
Date Particular Amount Date Particular Amount
26th
October
bank 820 Balance b/d 820
Balance c/d 820
Rent account
Date Particular Amount Date Particular Amount
30th
October
Bank 850 Balance b/d 850
Balance c/d 850
Drawings
Date Particular Amount Date Particular Amount
31st
October
Bank 1200 Balance b/d 1200
Balance c/d 1200
Posting in the trial balance
Trial balance as at 31st October
Particulars Debit Credit
Bank 8030
7

Cash 7340
Flat 45000
Car 12000
Capital 71800
Purchases 5150
Home Ltd 5150
Computer 800
Printer 200
Repair Expenses 110
Rent 50
Rayan 150
Laptop 1700
Wages 820
Drawings 1200
Sales 5600
TOTALS 82550 82550
Construct the Income Statement
INCOME STATEMENT
Particulars Amount (£) Amount (£)
Net Sales 5600
Less: Cost of Goods Sold 4830
Purchases 5150
Add: Closing Stock 320
Gross Profit 770
8

Less: Operating Expenses 980
Repair Expenses 110
Rent 50
Wages 820
Net Loss -210
Provide details of the Balance Sheet
BALANCE SHEET
Particulars Amount (£ )
ASSETS
Current Assets:
Stock 320
Bank 8030
Cash 7340
Debtor (Rayan) 150
Total Current Assets 15840
Fixed Assets:
Flat 45000
Car 12000
Computer 800
Printer 200
Laptop 1700
Total Fixed Assets 59700
Total ASSETS 75540
9

EQUITY AND LIABILITIES:
Liabilities:
Current Liabilities:
Creditors (Home Ltd.) 5150
Total Current Liabilities 5150
Equity:
Capital 71800
Less: Drawings 1200
Net Loss -210
Total Equity 70390
Total Liabilities 75540
Explaining drawings in case of Anne
Drawings are those amount in business which is withdrawn from the business for personal use
(Chaney, Gunn, and Coleman Jeter, 2020). for instance,in the above case Anne uses bank
account amount for spending on hotel and flight expenses which is completely not related to the
business .
TASK 2
Determine the Accounting Ratios of the Business
 Net Profit Margin = ( Net profit / Net Sales ) * 100 = ( - 210 / 5600 ) * 100 = - 3.75 %
 Gross Profit Margin = ( Gross Profit / Net Sales) * 100 = ( 770 / 5600 ) * 100 = 13.75
%
 Current Ratio = Current Assets / Current Liabilities (Wiratama, and Asri, 2020) =
15480 / 5150 = 3.01
 Acid Test ratio = ( Current Assets – Stock ) / Current Liabilities = ( 15480 – 320 ) /
5150 = 2.94
10