Financial Accounting: Ratio Analysis & Financial Statement Report

This report provides a comprehensive analysis of financial accounting principles, focusing on the preparation of financial statements and the application of ratio analysis. Part A details the double-entry recording of transactions for Linda Ltd, including T-accounts, trial balance, income statement, and balance sheet, along with a letter explaining the concept of drawings. Part B evaluates Anne’s business performance using various financial ratios, assessing profitability, liquidity, and efficiency, and also considers the impact of the COVID-19 pandemic on its operations. The analysis includes computations of gross profit, net profit, current ratio, quick ratio, trade receivable, and trade payable ratios, comparing them against industry benchmarks and competitor averages. The report concludes with recommendations for Linda Ltd and Anne’s business to improve financial performance and stability.

Assessment 2

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
PART A......................................................................................................................................3
a) Presenting double entry record the transactions in T-accounts..........................................3
b) Balance the accounts and bring down an opening balance................................................3
c) Drafting a trial balance of Linda ltd on 31st October 2021...............................................3
d) Preparing an Income Statement for the period ended on 31st October 2021....................3
e) Drafting a balance sheet on 31st October 2020.................................................................3
f) Writing a brief letter to Linda ltd explaining aspects related to drawing...........................3
PART B......................................................................................................................................3
a) Determining ratios for Anne’s business............................................................................3
b) Evaluating performance of Anne’s business on the basis of ratios and impact on covid
19 on it....................................................................................................................................6
CONCLUSION..........................................................................................................................7
REFERENCES...........................................................................................................................9

INTRODUCTION
Accounting is concerned with the recording of daily transactions that associated with
business. All kind of business units such as sole proprietor, public & private limited firm lays
high level of emphasis on maintaining records. This in turn helps business entity in assessing
financial position and performance at the end of an accounting year. The current report will
highlight income, expenses, assets and liabilities of Linda ltd during the concerned period. It
also entails how ratio analysis tool can be used for evaluating company’s performance from
several perspectives.
PART A
a) Presenting double entry record the transactions in T-accounts

b) Balance the accounts and bring down an opening balance