Financial Accounting: Recording Business Transactions Assignment

This assignment provides a comprehensive analysis of recording business transactions, starting with journal entries and T-accounts. It progresses through the creation of ledger accounts, trial balances, income statements, and balance sheets for Linda's business. The solution includes detailed calculations, such as balancing accounts and preparing financial statements for the period ending October 31, 2020. Part B focuses on ratio analysis, calculating net profit margin, gross profit margin, current ratio, quick assets ratio, and collection periods. The report then compares Linda's business ratios to those of its competitors, providing insights into financial performance and decision-making. The assignment concludes with a summary of findings and references to relevant accounting literature.

Recording
Business
Transaction

Table of Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
Journal transactions of T- accounts:............................................................................................1
Balance the accounts and an opening balances:..........................................................................2
Trial balance:...............................................................................................................................8
Income statement for the period 31st Oct. 2020:.........................................................................8
Preparation of financial position 31st Oct. 2020:........................................................................8
PART B............................................................................................................................................9
Ratio calculation for Linda's business:........................................................................................9
Analysis of ratio analysis in comparison to its competitors:.....................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business transactions is the process which includes transactions for goods. Money,
services for various parties for the business. It includes various transactions which business uses
for its activities. It is about recording those transactions which the business runs for its activities
which helps its for higher profitability. Company's records its transactions for its decision
making which helps for better performance which helps for higher profitability. It is about
managing activities which helps managers for decision making. Businesses which are use
accounting methods for recording its activities it will helps it for managing financial system for
the business (Adamyk, 2017). For example, the company purchases building it is the transactions
for the business. This report is bases for recording business transactions which helps company's
for better decision making which helps for higher profitability for the businesses. This report
includes topics which are journal, ledger and trial balance. Apart from this it includes topics
which are cash account and ratio analysis in comparison for competitors for the businesses.
PART A
Journal transactions of T- accounts:
JOURNAL ENTRIES
S.NO Date Particulars L.F £ £
2020
1 01/10/20 Cash A/c Dr. 5200
Bank A/c Dr. 8000
Van A/c Dr. 3000
To Capital A/c 16200
(Capital invested into business)
2 02/10/20 Laptop A/c Dr. 1000
To Bank A/c 1000
( Purchased laptop by cheque)
3 04/10/20 Purchase A/c Dr. 2450
1

To Toys LTD. A/c 2450
(Goods purchased on Credit basis)
4 05/10/20 Bank A/c Dr. 1500
To Sales A/c 1500
(Goods sold by cheque)
5 12/10/20 Repair A/c Dr. 80
To Cash A/c 80
(Laptop Repair with cash)
6 18/10/20
Toys LTD. A/c
Dr. 100
To Purchase Return A/c 100
(Goods Return)
7 21/10/20 Bank A/c Dr. 500
To rent A/c 500
(Rent received)
8 23/10/20 Fred A/c Dr. 400
Cash A/c Dr. 1500
To Sales A/c 1900
(Goods sold)
9 23/10/20 Cash A/c Dr. 500
To Sales A/c 500
(Goods sold)
10 24/10/20
Car A/c
Dr. 2500
2

To Bank A/c 2500
(Car purchased
11 26/10/20 Wages A/c Dr. 820
To Bank A/c 820
(Wages paid)
12 30/10/20 Drawings A/c Dr. 1600
To Bank A/c 1600
(Amount withdraw for personal use)
13 31/10/20 Rent A/c Dr. 1000
To Bank A/c 1000
(Rent Paid)
Total 30150 30150
Balance the accounts and an opening balances:
Ledger
BANK ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
01/10/20 To capital 8000 02/10/20 By laptop 1000
05/10/20 To sales 1500 24/10/20 By car 2500
21/10/20 To capital 500 26/10/20 By Wages 820
3

30/10/20 By drawings 1600
31/10/20 By rent 100
31/12/20 By balance c/d 3080
Total 10000 Total 10000
01/11/20 To balance b/d 3080
CASH ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
01/10/20 To capital 5200 12/10/20 By Repair 80
23/10/20 To sales 1500 31/10/20 By balance c/d 7120
To sales 500
Total 7200 Total 7200
01/11/20 To balance b/d 7120
VAN ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
01/10/20 To capital 3000 31/10/20 By balance c/d 3000
Total 3000 Total 3000
4

01/11/20 To balance b/d 3000
CAPITAL ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
31/10/20 To balance c/d 16200 01/10/20 By Bank 8000
By Cash 5200
By Van 3000
Total 16200 Total 16200
01/11/20 By Balance b/d 16200
LAPTOP ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
02/10/20 To bank 1000 31/10/20 By balance c/d 1000
Total 1000 Total 1000
01/11/20 To balance b/d 1000
PURCHASE ACCOUNT
Dr.
CR.
5

Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
04/10/20 To toys ltd 2450 31/10/20 By Trading 2450
Total 2450 Total 2450
TOYS LTD ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
18/10/20
To Purchase
Return 100 04/10/20 By purchase 2450
31/10/20 To balance c/d 2350
Total 2450 Total 2450
01/11/20 By Balance b/d 2350
SALES ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
31/10/20 To Trading 3900 05/10/20 By Bank 1500
6

23/10/20 By fred 400
By Cash 1500
By Cash 500
Total 3900 Total 3900
PURCHASE RETURN ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
31/10/20 To Trading 100 18/10/20 By toys ltd. 100
Total 100 Total 100
RENT ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
31/10/20 To bank 1000 21/10/20 By Bank 500
31/10/20
By Profit and
Loss 500
Total 1000 Total 1000
FRED'S ACCOUNT
Dr.
7

CR.
Date Particulars
Jour
nal
Foli
o £ Date Particulars
Jou
rnal
Fol
io £
23/10/20 To sales 400 31/10/20 By balance c/d 400
Total 400 Total 400
400
WAGES ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
26/10/20 To sales 820 31/10/20
By Profit and
Loss 820
Total 820 Total 820
CAR ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
24/10/20 To bank 2500 31/10/20 By balance c/d 2500
Total 2500 Total 2500
8

01/11/20 To balance b/d 2500
REPAIR ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
12/10/20 To cash 80 31/10/20
By Profit and
Loss 80
Total 80 Total 80
DRAWINGS ACCOUNT
Dr.
CR.
Date Particulars
Jou
rnal
Foli
o £ Date Particulars
Jou
rna
l
Fol
io £
30/10/20 To bank 1600
By Profit and
Loss 1600
Total 1600 Toal 1600
Trial balance:
Trial balance:
Debit Trail Balance Credit
Particulars £.( amount) Particulars £( amount)
Bank 3080 Capital 16200
9

Cash 7120 Toys Ltd. 2350
Van 3000 Sales 3900
Laptop 1000 Purchase Return 100
Purchase 2450
Rent 500
Fred 400
Wages 820
Car 2500
Repair 80
Drawings 1600
Total 22550 Total 22550
Income statement for the period 31st Oct. 2020:
Dr Trading Account Cr.
Particulars £. Particulars Cr.
Purchase 2450 Sales 3900
Gross Profit 1800 Closing Stock 250
Purchase Return 100
Total 4250 Total 4250
Dr Profit and Loss Account Cr.
Particulars £. Particulars £
Rent 500 Gross Profit 1800
Wages 820
Repair 80
Net Profit 400
Total 1800 Total 1800
10