Business Transaction Recording: Financial Statement and Ratio Analysis

This report provides a comprehensive analysis of recording business transactions, emphasizing the importance of accurate financial documentation for informed decision-making. It covers key areas such as journal entries, ledger accounts, trial balance formulation, income statement preparation, and balance sheet construction. Furthermore, the report includes a ratio analysis to assess the company's liquidity, profitability, and efficiency. The findings suggest that while the company is in relatively good financial health, there are areas that require improvement, particularly in managing resources and controlling expenses. The impact of external factors, such as the Covid-19 pandemic, on the company's financial performance is also considered, highlighting the need for adaptive strategies to ensure long-term sustainability and competitiveness.

Recording Business
Transaction

Contents
INTRODUCTION...........................................................................................................................................3
ASSIGNMENT 2............................................................................................................................................3
PART A.........................................................................................................................................................3
a) Preparing double entry system to record transaction in journal entries.............................................3
b) illustrating below ledge account to get opening balance...................................................................6
c) Formulating Trial balance as at 31st October 2021...........................................................................17
d) Preparing Income Statement for the period ended 31st October 2021............................................18
e) Formulating balance sheet as at 31st October 2021.........................................................................19
f) Writing letter......................................................................................................................................20
PART B.......................................................................................................................................................21
a) Determination of ratios.....................................................................................................................21
b............................................................................................................................................................23
CONCLUSION.............................................................................................................................................24
REFERENCES..............................................................................................................................................26

INTRODUCTION
Recording business transactions is an important factor that aids in acquiring knowledge
about the completed commercialization, allowing for a good alternative to decision-making. It is
centered into a double entry system, which records transactions in two accounts in order to
provide a comprehensive evaluation of the company's productivity (Haralayya, 2021). The
present report will include important details on issues such as journal entry documenting,
bringing statement of account from ledge, constructing trial balance, income statement, and
financial condition. These are mostly responsible for delivering critical information which helps
in determining the firm's current effectiveness. It will include the calculation of ratios in order to
assess the company's efficiency using this analytical approach.

ASSIGNMENT 2
PART A
a) Preparing double entry system to record transaction in journal entries

b) illustrating below ledge account to get opening balance

c) Formulating Trial balance as at 31st October 2021

d) Preparing Income Statement for the period ended 31st October 2021
The income statement is useful in determining the total expenditures made by the firm in both
directly and indirectly forms, as well as the specifics of gains made over a certain span of years.
It is one of the most important income statements for collecting the correct amount of awareness
that may guide a firm's operations strategy. Based on the analysis of the given data, it can be

concluded that the company's costs for attaining viability include rent of an apartment, printing
maintenance, and other indirect revenue sources such as rent. Based on the costs shown, it may
be concluded that the firm will be unable to create revenue, resulting in operating losses. There is
a need for change in order to enhance the service functioning of the company.
e) Formulating balance sheet as at 31st October 2021
As at the conclusion of the time, fiscal situation offers an overview of a given year's
achievement. This is one of the most important income statements since it helps to explain the
facts of complicated business contracts. On the benefits of equity knowledge about a certain

year's success that has been established using accounting equations. The existing business has
current and fixed resources, including a flat, a workstation, money, stock level, and so on. From
the other hand, there are obligations, which are divided into two categories: local and medium.
There is just brief indebtedness and no lengthy lending transactions. On the analysis of the
knowledge presented, it is possible to conclude that the efficacy is minimal (Lalithchandra,
2021).
f) Writing letter
To Linda
Subject: Articulating concern related with withdrawals for holidays
In today's working climate, a lot of aspects must be considered when assessing a team's
growth. For with this reason, both internally and externally factors must be considered in order
to have a thorough picture of the company's productivity. From the analysis of supplied data
about a firm's earnings, this may be appropriately exercised by analysing the revenue and
financial statement. The statement of income yearly shows that there was a loss owing to
inefficient concurrency control. It reflects how ineffectively a certain firm manages its
operational operations. The balance sheet shows that the corporation is not successfully
cooperating with current conditions due to a lack of flexibility. There is a withdrawals for a
private vacation, which is depleting the money.
It is critical for the organisation to start paying attention to having substantial knowledge about
irrelevant operations via accurate determination, as this will allow the company to eliminate
aspects that have a negative influence. The firm's current performance is poor, suggesting that it
is unsuccessful in measuring and managing the organization's corporate operations. It is
diminishing capital, which is a poor symptom of process performance management. To obtain
the skill to cooperate with holding circumstances, the owner must comprehend the need of
maximising resource usage. According to the irresponsible actions of management and the
owner, the current state of the business does not produce in success. In order to get ahead,
gaining a competitive advantage is critical in order to design a superior continued growth
strategy. For such a reason, it is critical to comprehend how a firm may take appropriate steps to
get a market edge and effectively cope with current conditions. As a small business, it is clear

that the only way to achieve accomplishment is to ensure efficient management by eliminating
non-essential spending in order to achieve competitiveness and long-term viability. Furthermore,
it may be deduced that awareness for not withdrawing should be offered in order to cope with
competing circumstances in a more favourable and steady manner.
PART B
a) Determination of ratios
Ratio analysis is among the techniques for obtaining information in a simplified form by
focusing on emphasising important elements. The following are the calculated ratios:

b
Based on the analysis of the above-mentioned figure, it is clear that there are a number of
measurements that are useful in evaluating specific aspects. It may be determined that the firm's
service is satisfactory based on the presented information concerning return on assets including
gross and net. Gross efficiency is a useful metric for determining how successfully a company
makes money by lowering its cost of sales. Furthermore, the computed outcomes, like 94
percent, are determined. It may be evaluated to the optimum and rivals' averages, which helps in
determining if a firm is performing better than the other entities. Net profitability is a measure of
a company's capacity to generate money by selling more products. The outcomes of competitors
are lower than Anne's organizational NP margin, which is 77 percent. It is greater than the
industry's usual benchmarks, which is around 20%. On this premise, it may be determined that
the current company is performing financial shape in terms of revenue (Grassetti, Mammana and
Michetti, 2022).

It is critical for the corporation to focus on evaluating liquidity ratios when determining
organizational success in financial terms. This one is focused with determining how successfully
a company's cash and comparable supplies are used to meet current obligations. It may be
evaluated using current and quick ratios to have a deeper knowledge of organizational
effectiveness. On the grounds of estimated numbers for current and fast ratios of 3.08 and 3.014
times, correspondingly. It is clear those are higher-than-ideal comparison standards in order to
obtain accurate information. The current ratio of rivals is lower than Anne's firm performance,
indicating that she is better prepared to deal with current obligations. The fundamental
explanation for this is that current assets such as debts, stock level, and so on are readily
available. The quick ratio of similar organizations is close to the optimum margin established to
evaluate, indicating Anne's business's inability to control resources operating. With the info
supplied, it is possible to determine that modifications are required to improve organizational
productivity. It may be affected by taking steps such as establishing a strong credit terms,
creating an inventory control system, and so on.
Various sorts of investors are interested in gaining a better knowledge of the organisation
by concentrating on result of ongoing and other aspects of its efficacy. It may be assessed by
focusing on organizational aspects like commercial receivables and payables. The accounts
receivables days are used to determine how well a firm can recover payments from customers
who have purchased stocks on margin. It aids in the development of a solid liquid assets. Anne's
business has a collecting time of 10 days, which is lower than the industry average,
demonstrating that the business is very skilled at organizing its credit relationships with
customers and collecting. But at the other hand, trade payable demonstrates how the firms ’
financial off accounts payable, which takes about 26 days and is determined to be higher than
comparable organisations' results. Based on this, it can be determined that the financial situation
is good than rivals, though there are some areas that need to be improved. Covid 19 has been
cited as among the most significant events that has changed the way businesses operate. Anne's
financial situation indicates that she is succeeding in going through this process.
CONCLUSION
It can be concluded from the foregoing research that documenting transactions in accounting
records is critical for obtaining information necessary to compile income and cash situation

statements. It is the most important financial statements since they assist to providing important
information that aids in the formulation of important decisions. The present study places a strong
focus on the creation of diary entries, ledger accounts, trial balances, statement of income, and
income reports. For gathering information to analyses performance, measures like liquidity,
competitiveness, and efficiency were calculated. Anne's firm is in good financial shape, however
there are a few locations where improvements are needed.

REFERENCES
Books and Journal
Haralayya, B., 2021. Financial Statement Analysis of Shri Ram City Union Finance. Iconic
Research And Engineering Journals. 4(12). pp.183-196.
Grassetti, F., Mammana, C. and Michetti, E., 2022. A dynamical model for real economy and
finance. Mathematics and Financial Economics. pp.1-22.
Lalithchandra, B.N., 2021. Liquidity Ratio: An Important Financial Metrics. Turkish Journal of
Computer and Mathematics Education (TURCOMAT). 12(2). pp.1113-1114.
Asutay, M., Wang, Y. and Avdukic, A., 2021. Examining the performance of Islamic and
conventional stock indices: a comparative analysis. Asia-Pacific Financial Markets. pp.1-
29.