Comprehensive Analysis of Business Transactions and Financial Health

This assignment provides a detailed analysis of business transactions, starting with the recording of journal entries and the creation of general ledgers. It demonstrates the formulation of a trial balance and the construction of financial statements, including the income statement and balance sheet. Furthermore, the assignment explains the concept of drawings and calculates key accounting ratios such as net profit margin, gross profit margin, current ratio, and acid test ratio. It also discusses the impact of the COVID-19 pandemic on the business, highlighting the challenges and potential strategies for recovery. The report concludes by emphasizing the importance of accounting in assessing a business's financial position and adapting to changing market conditions, with references to relevant academic sources.

Business Transactions
Assessment 2

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK A...........................................................................................................................................3
Record the business transactions in journal................................................................................3
Prepare general ledgers...............................................................................................................5
Formulate the Trial Balance........................................................................................................8
Construct the Income Statement.................................................................................................8
d) Prepare Income Statement ending on 31 October 2021.........................................................8
e) Balance Sheet..........................................................................................................................9
What are drawings, explain this to Linda..................................................................................10
Part B ............................................................................................................................................10
Calculate the accounting ratio...................................................................................................10
How does Covid-19 pandemic affect the business in case.......................................................10
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business transactions refers to the events that haoppen in the business that are duly recorded in
the books of accounts (Matthews, 2017). These transactions helps the management of the
business. It is the way that a monetary transaction is done 'tween two or more organisation which
can affect in the exchange of the employment and goods, money etc.
TASK A
Record the business transactions in journal
JOURNAL ENTRIES
Date Particulars Debit Credit
01/10/21 Bank
Cash
Flat
Car
Capital
(Business being started with cash, flat and a car)
10000
4800
45000
12000
71800
02/10/21 Purchases
Home Ltd
(goods of the firm i.e., furniture being purchased on
credit from Home ltd.)
5400
5400
04/10/21 Computer
Printer
Bank
(Computer and printer being bought for cash)
800
200
1000
05/10/21 Bank
Sales
(Goods worth 2800 being sold)
2800
2800
12/10/21 Repair Expense
Cash
110
110

(repair expenses incurred for repairs done in printer)
18/10/21 Home Ltd.
Purchases
(Furniture of wroth 250 being returned to home ltd.)
250
250
21/10/21 Bank
Rent Income
(Rent being received by the organisation)
800
800
23/10/21 Rayan
Cash
Sales
(sold goods to Rayan worth 2100, out of which, 1800
have been received by the business)
300
1800
2100
23/10/21 Cash
Sales
(sold goods to David for cash)
700 700
24/10/21 Laptop
Bank
(A new laptop has been bought for official use.
1700
1700
26/10/21 Wages
Bank
(shopkeeper has been paid monthly wages)
820
820
30/10/21 Rent Expenses
Bank
(a place being rented by the business and paid expenses
for same)
850
850
31/10/21 Drawings
Bank
(Money being paid by the business for a personal
1200
1200

expense of the owner)
31/10/21 Cash
Rayan
(Rayan, the debtor of the business paid for the debt)
150
150
Prepare general ledgers
Bank Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 10000 04/10/21 Computer 800
21/10/21 Rent 800 04/10/21 Printer 200
05/10/21 Sales 2800 24/10/21 Laptop 1700
26/10/21 Wages 820
30/10/21 Rent 850
31/10/21 Drawings 1200
31/10/21 Balance c/d 8030
13600 13600
Cash Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 4800 12/10/21 Repair 110
23/10/21 Sales 1800
23/10/21 Sales 700
31/10/21 Rayan 150 31/10/21 Balance c/d 7340
7450 7450
Flat Account
Date Particulars Ref Amount Date Particulars Ref Amount

01/10/21 Capital 45000 31/10/21 Balance c/d 45000
45000 45000
Car Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 12000 31/10/21 Balance c/d 12000
12000 12000
Capital Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Bank 10000
01/10/21 Cash 4800
01/10/21 Flat 45000
31/10/21 Balance c/d 71800 01/10/21 Car 12000
71800 71800
Purchases Account
Date Particulars Ref Amount Date Particulars Ref Amount
18/10/21 Home Ltd 5400 02/10/21 Home Ltd 250
31/10/21 Balance c/d 5150
5400 5400
Home Ltd Account
Date Particulars Ref Amount Date Particulars Ref Amount
02/10/21 Purchases 250 18/10/21 Purchases 5400
31/10/21 Balance c/d 5150

5400 5400
Computer Account
Date Particulars Ref Amount Date Particulars Ref Amount
04/10/21 Bank 800 31/10/21 Balance c/d 800
800 800
Printer Account
Date Particulars Ref Amount Date Particulars Ref Amount
04/10/21 Bank 200 31/10/21 Balance c/d 200
200 200
Repair Expenses Account
Date Particulars Ref Amount Date Particulars Ref Amount
12/10/21 Cash 110 31/10/21 Balance c/d 110
110 110
Rent Account
Date Particulars Ref Amount Date Particulars Ref Amount
21/10/21 Bank 850 30/10/21 Bank 800
31/10/21 Balance c/d 50
850 850
Rayan Account
Date Particulars Ref Amount Date Particulars Ref Amount
23/10/21 Sales 300 31/10/21 Cash 150

31/10/21 Balance c/d 150
300 300
Sales Account
Date Particulars Ref Amount Date Particulars Ref Amount
05/10/21 Bank 2800
23/10/21 Rayan 300
31/10/21 Balacne C/d 5600 23/10/21 Cash 1800
23/10/21 Cash 700
5600 5600
Laptop Account
Date Particulars Ref Amount Date Particulars Ref Amount
24/10/21 Bank 1700 31/10/21 Balance c/d 1700
1700 1700
Wages Account
Date Particulars Ref Amount Date Particulars Ref Amount
26/10/21 Bank 820 31/10/21 Balance c/d 820
820 820
Drawings Account
Date Particulars Ref Amount Date Particulars Ref Amount
31/10/21 Bank 1200 31/10/21 Balance c/d 1200
1200 1200

Formulate the Trial Balance
Particulars Debit Credit
Bank 8030
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
d) Prepare Income Statement ending on 31 October 2021.
INCOME STATEMENT
Particulars Amount (£) Amount (£)

Net Sales 5600
Less: Cost of Goods Sold 4830
Purchases 5150
Add: Closing Stock 320
Gross Profit 770
Less: Operating Expenses 980
Repair Expenses 110
Rent 50
Wages 820
Net Loss -210
e) 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
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
What are drawings, explain this to Linda.
It is being advised to Linda that the sum of £ 1200 has been paid from the concern bank account
to pay for the trip of anne york a hotel and air ticket to Scotland for her holiday. These are well-
advised as drawings because the sum is reserved out of bank account (Evans, and Paisey, 2018)
of the bsuiuenss that has been paid for the vacation of Anne York.
Part B
Calculate the accounting ratio
 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
 Accounts Receivable Collection Period = ( Average Debtors / Net Sales ) * 365 =
( 150 / 5600 ) * 365 = 9.78 Days
 Accounts Payable Payment Period = ( Average Creditors / Net Purchases ) * 365 =
( 5150 / 5150 ) * 365 = 365 Days
How does Covid-19 pandemic affect the business in case.
It can be well thought out that the execution of Anne’s Business is extremely adequate as
compared to the rival ratios (Bellucci, Bianchi, and Manetti, 2021). The institution is having high
magnitude of actual assets as compared to the actual liabilities which is displaying that the
establishment is having a strong fiscal point as compared to the challenger's average. Therefore,
in command to stay in the contest, Anne’s Enterprise is extremely confident.
The eruption of the planetary epidemic have somehow stricken the operations of the
enterprise substantially because of which the gain margins reduced. This at last disclosed a
ruination in the earnings of the business concern. It has been extremely suggested to the various
enterprise to take care of treatment the enterprise in the post corona stage. Some new and
contrary changes demand to be adopted by the business organisation so that it can come
backmost on track with high plane of profits (Andreeva, 2021). Once the ascertain in the
marketplace place are normalized, it will mechanically extemporise the working of the enterprise
operation in the most impressive fashion which will finally lead the enterprise towards the way
of attainment (Matringe, 2020).
CONCLUSION
The above report can be concluded by saying that accounting is an important tool in the business.
Business transactions are recorded by following the accounting rules. The recording is done to
ascertain the financial position of the business. The above assessment shows how these
recordings are done in the books of accounts. The recordings are done for different firms. The