Recording Business Transactions: Financial Statement Analysis

This report provides a detailed analysis of recording business transactions, starting from journal entries to preparing financial statements, including the income statement and balance sheet. It covers double-entry recording, balancing accounts, and extracting a trial balance. The report also includes a letter explaining concerns about drawings in small businesses and calculates key financial ratios to analyze Anne's business position compared to competitors. The analysis reveals a net loss, high liquidity, and an extended accounts payable period, potentially influenced by the pandemic. Desklib offers a platform for students to access similar solved assignments and past papers.

Recording Business
Transaction

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
a. Double entry recording............................................................................................................3
b. Balancing the accounts............................................................................................................6
c. Extracting the trial balance....................................................................................................12
d. Preparation of the income statement for the period ending 31st October..............................13
e. Preparing the statement for Financial position as on 31st October........................................14
f. Letter to Linda explaining the concern relating to drawings for a small business................15
PART B..........................................................................................................................................16
a. Calculaiton of the ratios........................................................................................................16
b. Analysing the position of Anne in compariosn to the competitors.......................................17
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................20

INTRODUCTION
For any business to keep successfully most essential or spec is to record each and every
transaction within the business. Accounting is being referred to as theme process through which
all the transactions of financial nature a be recorded and analysed in order to calculate the profit
and to communicate the outcomes with the intended users. The use of accounting is very
important for the business to get successful as it provides the base that how much profit has been
earned by the company. The current report will outline whole process of accounting that is
starting with journal to preparing the financial statements and then calculating the ratios.
PART A
a. Double entry recording
Journal is being referred to as the books of accounts where in all the transactions of
financial nature are being recorded in order to analyse profitability of the business. For any kind
of business it is very necessary that proper books of accounts are being maintain in order to
analyse that whether the business has attend the profit or not . Further analysis relating to
analysing and reaching to the amount of profit or lost being incurred by the company
journalising all the transactions of financial nature is very important for the business and do
analysis by the company.

b. Balancing the accounts
Further the next step involves undertaken the use of ledger accounts. These ledger
accounts are the second stage of the accounting process where in all the transactions being
recorded in journal a posted into this Pacific accounts. This is very important in order to ensure
that all the transactions have been recorded in proper manner and there is a dual entry relating to
each and every account being involved (Giovanni and et.al., 2019). Within the ledger every
transaction is being recorded into the specific account. For example there are two accounts being
involved that is sales and cash then in this case the entry of the transaction will be recorded and
both accounts that is sales and cash.

c. Extracting the trial balance
The trial balance is being referred to as the book keeping worksheet which assists
company order to balance the amount of all the different ledger accounts being compiled in form
of debit and credit columns. It is mandatory that the total of both the columns is being equal
within the trial balance. The reason behind the fact that the total of both column need to be equal
is that the accounting is based on the concept of dual aspect (Dechsupa and et.al., 2021). Hence
this simply means that every transaction has a dual affect that is one on debit side and another on
credit side. Thus for the accounting to be perfect it is necessary that in the trial balance both the
debit and credit column are being equal. In case there is both columns are not equal then it
employees that there is some issue relating to the accounting or any error has been occurred.