Financial Recording, Reporting, and Analysis of Business Transactions

This report provides a detailed analysis of recording business transactions for Anne’s business, a sole proprietorship dealing in furniture. It covers the entire accounting cycle, starting with journal entries for October 2021, followed by posting these transactions to ledger accounts. A trial balance is then prepared to ensure the accuracy of the recorded data. The report further includes an income statement to determine the profitability of the business and a balance sheet to present its financial position. Additionally, the report addresses a query regarding the treatment of personal expenses and includes a ratio analysis to evaluate the company's liquidity and profitability, interpreting the results in the context of the economic conditions prevailing during the period. The report concludes by emphasizing the importance of systematic financial record-keeping for effective communication and decision-making.

Recording business
transactions

Table of Contents
Introduction:..............................................................................................................3
Part A.........................................................................................................................3
Journal books of Anne’s business as on 31 October, 2021...................................3
Ledger books of Anne’s business as on 31 October, 2021....................................4

Introduction:
This report focuses on preparing and maintaining the financial records of
Anne’s business. In this Anne is sole trader dealing in purchasing and selling of
furniture. Here, all monetary transactions are firstly, recorded in the journal books
then these are posted in ledger accounts and at the last these are summarized in
income statements and balance sheet. In this income statement is prepared to
ascertain revenues and expenses of specific period. Whereas, balance sheet is
prepared to ascertain true and fair position of business enterprises. Besides this,
financial tools are used to evaluate the current performance of business and to
compare it with other companies of same industry. Here, ratios are used to evaluate
liquidity and profitability position of the enterprise.
Part A
a) Journal books of Anne’s business as on 31 October, 2021
Date Particular Dr.
£
Cr.
£
1.10.2021 Bank
Cash
Flat
Car
Capital
(started operations with these assets)
10000
4800
45000
12000
71800
2.10.2021 Purchase
Home ltd. (Creditor)
(purchased furniture on credit)
5400
5400
4.10.2021 Computer
Printer
Bank
Purchased computer and printer )
800
200
1000
5.10.2021 Bank
Sales
(Sold goods and received amount)
2800
2800
12.10.2021 Repairing expenses 110

Bank
( incurred expenses on repairing printer)
110
18.10.2021 Home ltd (creditor)
Purchase return
(furniture returned to home ltd)
250
250
21.10.2021 Bank
Rent
(Amount received of rent)
800
800
23.10.2021 Cash
Debtor (Rayan)
Sales
(sold goods to rayaan and received half
payment in cash and half on credit)
1800
300
2100
23.10.2021 Cash
Sales
(sold goods and received in cash)
700
700
24.10.2021 Laptop
Bank
(laptop purchased and payment made
through cheque)
1700
1700
26.10.2021 Wages
Bank
( made payment to worker)
820
820
30.10.2021 Rent
Bank
(made payment of rent)
850
850
31.10.2021 Drawing
Bank
(expenses incurred for personal
purposes)
1200
1200
31.10.2021 Cash
Rayan (debtor)
(amount received from Rayan)
150
150
b) Ledger books of Anne’s business as on 31 October, 2021
Bank account

Date Details Fol Amount
£
Date Details Fol Amou
nt £
1.10.
2021
Capital 10000 04.10.20
21
Computer and
printer
1000
05.10
.2021
Sales 2800 24.10.20
21
laptop 1700
21.10
.2021
Rent 800 26.10.20
21
Wages 820
31.10
.2021
Balance
c/f
8030 30.10.20
21
Rent 850
31.10.20
21
drawing 1200
total 13600 total 13600
1.11.202
1
Balance c/f 8030
Cash account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
1.10.
2021 Capital 4800 Repairing
expenses
110
23.10
.2021
Sales 1800

23.10
.2021
Sales 700 31.10.20
21
By balance c/f 7340
31.10
.2021
Rayan
(debtor)
150
1.11.
2021
Balance
b/d
7340
Flat account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
01.10
.2021
capital 45000 31.10.20
21
Balance c/d 45000
1.11.
2021
Balance
b/f
45000
Car account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
01.10
.2021
capital 12000 31.10.20
21
Balance b/d 12000
1.11. Balance 12000

2021 c/d
Capital account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
31.10
.2021
Balance
b/d
71,800 01.10.20
21
Bank 10000
01.10.20
21
Cash 4800
01.10.20
21
Flat 45000
01.10.20
21
car 12000
1.11.202
1
Balance c/d 71800
Creditor
Date Details Fol Amount
£
Date Details Fol Amou
nt £
18.10
.2021
Purchase
return
250 02.10.20
21
purchase 5400
31.10.20
21
Balance c/f 5150
1.11.
2021
Balance
b/d
5150

Purchase account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
02.10
.2021
Home ltd
(creditor)
5400 31.10.20
21
By balance c/f 5400
1.11.
2021
Balance
c/f
5400
Asset (computer, laptop, printer) account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
04/10
/2021
Bank 1000 31.10.20
21
Balance c/f 2700
21/10
/2021
Bank 1700
01/11
/2021
Balance
b/d
2700
Sales account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
31.10
.2021
Balance
c/f
5600 05.10.20
21
bank 2800

23.10.20
21
Cash 1800
23.10.20
21
Rayan
(debtor)
300
23.10.20
21
Cash 700
1.11.202
1
Balance b/f 5600
Expenses account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
12.10
.2021
Cash 110 31.10.20
21
By balance c/f 1780
26.10
.2021
Bank
(wages)
820
30.10
.2021
Bank
(rent)
850
1.11.
2021
Balance
b/f
1780
Income account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
31.10
.2021
Balance
c/f
800 21.10.20
21
Bank 800

(rent)
1.11.202
1
Balance b/f 800
Purchase return account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
31.10
.2021
Balance
c/f
250 18.10.20
21
Home ltd
(creditor)
250
1.11.202
1
Balance b/d 250
Drawing account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
31.10
.2021
bank 1200 31.10.20
21
Balance c/d 1200
1.11.
2021
Balance
b/d
1200

Debtor account
Date Details Fol Amount
£
Date Details Fol Amou
nt £
21.10
.2021
sales 300 31.10.20
21
cash 150
31.10.20
21
Balance c/f 150
1.11.
2021
Balance
b/d
150
c) Trial balance as on 31.October, 2021
Particular Debit (£) Credit (£)
Bank
Cash
Flat
Car
Capital
Creditor
Purchase
Computer
Printer
Laptop
Sales
8030
7340
45000
12000
5400
800
200
1700
71,800
5150
5600

Expenses
Incomes
Purchase return
Drawing
Debtor
Total
1780
1200
150
83,600
800
250
83,600
d) Income statement as on 31 October 2022
Particular Amount (£) Amount (£)
Sales
Less:
Cost of goods sold
( Opening stock + purchase – closing
stock )
(5150 – 320)
Gross profit/loss of the year
Less : operating expenses
Repair expenses
Wages
Rent
Add : operating income
5600
(4830)
110
820
850
(1780)
770