Accounting Report: Financial Statements Analysis for Several Companies

This accounting report provides an in-depth analysis of financial statements and business transactions. It begins by exploring the need for accounting information for decision-makers at Unilever, examining both internal and external users, and discussing the advantages and disadvantages of recording accounting information. The report then delves into specific examples, including journal entries for David Wise's business, the general ledger and trial balance for Pearce and Sons, and the income statement of Airman Co. for the year ending September 30, 2020, including an analysis of the impact of COVID-19 on the company's profitability. The report highlights the effects of the pandemic on revenue, fixed costs, workforce, and customer behavior, contributing to significant losses. The report provides valuable insights into accounting practices and the effects of external factors on business performance.

RECORDING BUSINESS
TRANSACTIONS

Table of Contents
INTRODUCTION...........................................................................................................................3
Part 1................................................................................................................................................3
a. Need of Accounting Information For Decision Makers of Unilever Company .....................3
b. Advantages and Disadvantages of Recording Accounting Information ................................4
Part 2................................................................................................................................................7
a) Journal Entries in David wise business ..................................................................................7
Part 3................................................................................................................................................7
a) General ledger of Pearce and Sons.........................................................................................7
b) Trial balance as at 30th February 2019.................................................................................10
Part 4.........................................................................................................................................10
a) Income Statement of Airman Co. as at 30th September 2020..............................................10
b) Impact of Covid 19 on the company's Income Statement ...................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
This project shall highlight the basics of accountancy, how the transactions are recorded and
furnished to the users of financial information and how are the profitability and the position of
the company calculated. The report shall be divided into four parts each focussing on different
aspects of accounting. The first part shall be explaining the various users of the accounting
information of Unilever company. The investors, management, customers, employees etc. using
the accounting information to facilitate the decision-making process. The second part shall be
disclosing the journal entries of the David Wise who has set up a new business in January 2020
before the outbreak of coronavirus. The third part of the project shall be demonstrating the ledger
accounts and the trial balance of Pearce and Sons for the month of February 2020. Lastly it shall
be reflecting the income statement of Airman Co. for the year ending 30th September 2020 and
showing the impact of covid 19 on the profitability of the company.
Part 1
a. Need of Accounting Information For Decision Makers of Unilever Company
Unilever is Multinational company that deals in consumer products, heath and face care
and listed on stock exchange .there are several decision makers that need accounting information
of the firm (Trigo, Belfo and Estébanez, 2016.). The objective of studying this wide data by
individuals is to identify the current position of company.
Internal Decision makers of information
These users are those who are known about the company's procedure and willing to take
decisions based on calculated accounting information.
Subordinates of Unilever
Employees' are interested in accounting information of the organization as it helps them
to understand growth that firm can actually achieve as it will impact their personal growth such
as jobs security and promotion (Susanto, 2016). Employees working in finance department find
it as their duty to prepare financial statement base on this information. Subordinates of Unilever
group checks these data to measure their performance.
Management
Management includes officers, board of directors and manager of Unilever. They use
these data for several decision-making like planning, organizing, directing and controlling, and

they also access accounting information to know ability of company to generate profits in future.
In financial information the management uses ratios like debt-equity, profitability and liquidity
ratios, income statements and balance sheet so that it can analyse its debt paying capacity of
Unilever company and requirement of funds can be identified by the top-level management so
that cash inflow and outflow can be adjusted.
Owners
They want to know the risk bearing capacity of business with the help of these data so
that they can take decision regarding allocation of their fund with the best strategies so that it can
give them optimum profit. Owners of Unilever company have shown many times though their
share prices that they are properly using data in adequate manner.
External Users of Accounting Information
Investors
Investors' decision of investing in any company is dependent on financial statement of
company. Unilever is company that have been on priority for some investors as its publish its
accurate financial data with full transparency.
Lenders
Lender's decision regarding lending fund to company is based on creditworthiness of
firm. The ability of paying debt is measured through calculating ratios (Olanrewaju and Jugu
2019). The Unilever company have good reputation due its solvency position in market.
Suppliers
Supplier gives input and final products to company on credit basis. It became essential
part to study the financial data of firm. Suppliers of Unilever company read the financial
statements to find out that giving o credit would be beneficial for them or not.
Tax Authorities
Tax Authorities need the financial information to determine that tax evasion can not be
take place by Unilever company. It a legal requirement for company to show its precise reports
to authorities.
b. Advantages and Disadvantages of Recording Accounting Information
There are several advantages and disadvantages of recording business transaction that
company get. Company deals various transaction so remembering each transaction becomes

difficult for company (Cunningham and et.al., 2020). And depending on these financial
statements can also adversely affect its performance.
Advantages
Prevention and detection of Fraud
Accounting helps business to avoid or omit the fraud and errors while recording business
transaction it play essential role as accounting data are used to decide and measure position of
company in market (Huerta and Jensen, 2017). Company get this advantage though recording
information as it help it to serve reports as a evidence of fair practices to investors, lenders, tax
authorities and to any other party.
Comparison of Results
Financial statements help the company to record the business transaction systematically
and fairly so it can be used by accountant to compare current position of company with previous
year position to measure the growth and sustainability of organization. It also helps to measure
the competition prevailing market and how many competitors are ahead of us.
Disadvantages
Records Only Financial Aspect
The biggest disadvantage of recording information is that it only consider monetary
transaction Accountant does not include impact of other non monetary transaction on business
that results in inaccurate position of firm. There are various factors that affect position of
businesses like economic conditions, government norms, competition in industry. All these are
also determinants of business position in industry (Nallareddy and Ogneva, 2017). So it gives
disadvantage of unfaithful position.
May be Manipulated
Information recorded by accountant may be false as the accountant is part of management
and the top-level management always wants firm to look in good stage without any errors so it
can be planned and manipulated by the management of organization.
Sole firm is type of organisation structure that is managed and owned by individual
person so remembering all the functioning would be difficult for him so recording all business
transaction can provide him benefit like all data in one place without any confusing the sole
proprietor can access to data and also it can provide its disadvantage like its time-consuming and

requires the skills of accountant so its only beneficial for large company as the sole proprietor
does not deal in large business transaction (O'Leary, 2017).
Partnership firm is that type of business structure that have two or more owners that will
to share profit or loss according to partnership deed. The biggest advantage of recording
financial information to this firm is that it can be serve as proof to other partner to ignore
disputes and misleading practices among partners of business and disadvantage of that it will
only record the monetary data not non financial data so wrong position of company is assumed
by the partners and necessary actions can be avoided to improve working of partnership firm due
to wrong information.

Part 2
a) Journal Entries in David wise business
Part 3
a) General ledger of Pearce and Sons
Bank Account
Date Particulars J.F. Amount Date Particulars J.F. Amount
To Capital
A/C 21500 By Cash A/C 1500

To Cash
A/C 350 By Van A/C 4800
By Nissan
A/C 5200
By Office A/C 620
By balance
c/d 9730
Total 21850 Total 21850
Van Account
Date Particulars J.F. Amount Date Particulars J.F. Amount
To Capital
A/C 25000
By balance
c/d 35000
To Bank
A/C 4800
To Nissan
A/C 5200
Total 35000 Total 35000
Lloyd's Bank Account
Date Particulars J.F. Amount Date Particulars J.F. Amount
To balance
c/d 2500 By Cash A/C 2500
Total 2500 Total 2500
Fixtures Account
Date Particulars J.F. Amount Date Particulars J.F. Amount
To Capital
A/C 800
By balance
c/d 2590
To Quick
Office A/C 1100

To Cash
A/C 70
To Bank
A/C 620
Total 2590 Total 2590
Cash in Hand Account
Date Particulars J.F. Amount Date Particulars J.F. Amount
To Lloyd's
Bank A/C 2500
By Office
Fixtures A/C 70
To Bank
A/C 1500 By Bank A/C 350
By balance
c/d 3580
Total 4000 Total 3930
Quick Office Account
Date Particulars J.F. Amount Date Particulars J.F. Amount
To balance
c/d 1100
By Office
Fixtures A/C 1100
Total 1100 Total 1100
Nissan Company Account
Date Particulars J.F. Amount Date Particulars J.F. Amount
To Bank
A/C 5200 By Van A/C 5200
Total 5200 Total 5200
Capital Account
Date Particulars J.F. Amount Date Particulars J.F. Amount

To balance
c/d 47300 By Bank A/C 21500
By Van A/C 25000
By Office
Fixtures A/C 800
Total 47300 Total 47300
b) Trial balance as at 30th February 2019
Part 4
a) Income Statement of Airman Co. as at 30th September 2020
REVENUE
Sales 80000
Sales Return 2000
Net Sales 78000
Opening Inventory 36000
(+) Purchase 150000
(-) Purchase Return 600
(-) Closing Inventory 120000

(Less) Cost of Goods Sold 65400
(Less) Carriage Inwards 720
Gross Profit 11880
Wages and Salaries 32000
Motor Expenses 1200
Rent 5000
Telephone Charges 620
Insurance 830
Office Expenses 600
Sundry Expenses 300
Carriage Outwards 400
Net Loss -29070
The gross profit of the Airman Co. for the year 2020 is 11880. and the net loss after decreasing
the operating expenses of the company is 29070. This shows that the profitability, position and
the growth prospects have been severely affected of the company due to the corona pandemic
(Xiong and et.al. 2020).
b) Impact of Covid 19 on the company's Income Statement
The impact of the epidemic has been severe on the company as from 2009 onwards for 10
years the company was a profitable venture. But suddenly due to the outbreak of coronavirus the
company incurred a loss of 29070 in the year 2020 (Kapparashetty, 2020). There are certain
reasons for such an impact which can be namely-
 The revenue of the company has decreased because of the business being closed due to
the lock-down for several months.
 Though the operations were shut down but the fixed costs were intact, this lead to further
burden for the company (Shen and et.al., 2020).

 The workforce were not working for half the year in government compliance, but the
wages and salaries had to be paid. This further lead to downfall in the profits of the
company.
 The fixed costs like the rent, telephone charges etc. were accrued even though the
business activities were not there. These overheads were not allocable to any of the jobs.
 The sales of the company were affected due to the lack of disposable income with the
customers and change in their spending habit (Chowdhury and et.al., 2020).
 The stock in hand remained idle for a period and this increased the cost of its storage and
the cost of damages.
 The debtor's recovery period also increased simultaneously because of liquidity issues
with the debtors. This posed further threat on the working cycle of the company.
 The liquidity crisis was also playing part in the loss of the company and this was because
of late recovery from debtors and improper management of cash.
 During the year the promotional activities were also not much so the company was
ineffective in attracting new customers in the company (Babuna and et.al., 2020).
 All the fixed assets of the company like van, fixtures and fittings were depreciated
without being used to generate the income. So these costs further burdened the company
without providing any simultaneous gain.
 The company could not provide attractive deals like discounts, freebies, coupons etc
which impacted it with the customer loyalty.
 The company had to further incur costs in respect to covid 19 like the sanitizers,
temperature machines, extra furnitures due to social distancing etc. These costs
contributed to the deepening of losses.
 Drawings were also made by the sole owner which decreased the capital in use by
decreasing the operations of the company (Rapaccini and et.al., 2020).
 The growth and expansion plans of the company could also not be achieved like targeting
a new market segment or launching a new product in the market.
 The company also suffered because of lack of technical excellence. The competitors
during the pandemic started the operations online but the company suffered as it does not
tech savvy employees. So their market share was captured by the competitors.