Recording Business Transactions and Financial Statement Analysis

This assignment delves into the intricacies of recording business transactions, encompassing a detailed analysis of journal entries, ledger accounts, and the preparation of financial statements. The initial sections explore the diverse users of accounting information, such as internal management, investors, and financial institutions, and their respective needs. It further examines the merits and demerits of accounting practices, particularly within large organizations. The assignment then presents a series of journal entries for David Wise, followed by ledger accounts for S. Keyes and other relevant parties, illustrating the process of tracking financial activities. Finally, it includes an income statement for Airman Co., analyzes the causes of financial losses, and discusses the impact of external factors, such as the COVID-19 pandemic, on business performance. The assignment also includes relevant references to academic sources.

Recording Business
Transactions

TABLE OF CONTENTS
ASSESSMENT 1:......................................................................................................................3
PART 1.......................................................................................................................................3
PART 2.......................................................................................................................................4
PART 3.......................................................................................................................................4
PART 4.......................................................................................................................................8
REFERENCES.........................................................................................................................10

ASSESSMENT 1:
PART 1
a.
The users of the accounting information differ in respect to the requirement. The
major users of this information from the perspective of the big organizations such as Coca
Cola for the decision making are the internal management team, top management, suppliers,
employees, lenders, financial and banking institutions, investors etc. The internal
management team uses this information in order to analyse the current position of the
company based upon which the future decision making is done (Joung and Lee, 2017). This
is used by the management in determining the areas where the business requires to put more
efforts and identify the areas of improvement. The other users of the information are not
within the business. These are the outside parties having interest in the functioning of the
business organization. For instance, the banks and other financial institutions will be
interested in knowing the financial credibility of the organization in respect to its
profitability, ability to repay back with interest etc (Horvat and Mojzer, 2019). From the
investor’s point of view, they will be interested in identifying the ability of the company in
providing higher return in respect to the funds provided or invested in the business. The users
of the accounting information will after analysing the different aspects as per the requirement
will undertake the decisions on account of the same.
b.
For the big organizations like Tesco and Marks and Spencer, there is huge number of
transactions being taken place each day and recording of the same turns out to be the most
important task. There are certain merits and demerits of accounting in regard to the
challenges that comes across the way of accountant. On the side of the merits, the accountant
is required to record all the financial transactions that incurs in an accounting year
irrespective of the fact whether payment has been made received (Baylus, 2017). Along with
that, there are transactions for which the payment might have been received in advance but
the goods or service to be provided in the next year. Thus, the this is the advantage of
accounting through which the accountant can easily record the business transaction without
any error leading to the accurate or correct presentation of the organisation’s performance
and position to the users.
But on the other hand, there are certain demerits as well. This is mainly because of the
circumstances that arose in the business. Sometimes, because of the pressure imposed by the

top management, the accountant is required to make little modification in regard to recording
of the transaction and in simple terms, manipulating the accounts with the help of the fake
bills and vouchers. This in turn results into window dressing of the accounting information of
the company which consequently leads to the accurate accounting information. Thus, these
are few situations that an accountant faces in the big organizations.
PART 2
Journal of David Wise for the month February 2020
Date Details Fol DT CT
Feb 1 Cash a/c 350
To office fixtures a/c 350
(Being office furniture returned back to the
supplier)
Feb 4 Bad debt a/c 85
To S. Keyes a/c 85
(Being bad debts written off)
Feb 9 Machinery a/c 2300
To Bank a/c 200
To TS. Co a/c 2100
(Being machinery purchased on cash and
credit.)
Feb. 13 Cash a/c 220
Bad Debts a/c 50
To S. Hill 270
(Being S. Hill declared bankrupt amount
received for full and final settlement)
Feb 20 Drawings a/c 180
To stock a/c 180
(Being goods taken out of the business for
personal use)
Feb 26 Drawings a/c 85
To Cash a/c 85
(Being amount paid for personal insurance
from the business)
Feb 28 TS. Co a/c 1050
To Bank a/c 1050
(Being half of the machinery debt paid
through cheque.)

PART 3
Date Details Fol Debit Credit
Feb 1 Bank a/c
Van a/c
Office fixtures
To capital
21500
25000
800
47300
Feb 2 Cash a/c
To loan from bank
2500
2500
Feb 3 Cash in hand a/c
To Bank a/c
1500
1500
Feb 4 Van a/c
To Bank a/c
4800
4800
Feb 5 Office fixture a/c
To Quick office ltd
1100
1100
Feb 8 Van a/c
To Nissan co.
5200
5200
Feb 15 Office fixture a/c
To Cash a/c
70
70
Feb 19 Nissan co.
To Bank a/c
5200
5200
Feb 25 Bank a/c
To Cash a/c
350
350
Feb 28 Office fixture a/c
To Bank a/c
620
620
Ledger accounts
Ledger of S. Keyes for the month of Feb 2019
Quick office ltd
Date Details Fol Amount Date Details Fol Amount
Feb
28
By bal c/f 1100 Feb 5 By office fixtures 1100
Total 1100 Total 1100

Nissan co
Date Details Fol Amount Date Details Fol Amount
Feb
19
To bank a/c 5200 Feb 8 By van 5200
Total 5200 Total 5200
Van a/c
Date Details Fol Amount Date Details Fol Amount
Feb 1 To capital 25000
Feb 4 To bank 4800
Feb 8 To Nissan co. 5200 Feb
28
By bal. c/f 35000
Total 35000 Total 35000
Cash a/c
Date Details Fol Amount Date Details Fol Amount
Feb 2 To loan from bank 2500 Feb
15
By offices
fixtures
70
Feb 3 To bank 1500 Feb
25
By bank 350
Feb
28
By bal c/f 3580
Total 4000 Total 4000
Capital a/c
Date Details Fol Amount Date Details Fol Amount
Feb 1 By bank 21500
Feb 1 By van 25000

Feb
28
To bal c/f 47300 Feb 1 By office fixture 200
Total 47300 Total 47300
Bank a/c
Date Particulars JF Amount Date Particular JF Amount
Feb 1 To capital 21500 Feb 3 By cash in hand 1500
Feb 25 To cash a/c 350 Feb 4 By van a/c 4800
Feb
19
By Nissan 5200
Feb
28
By office
furniture
620
Feb
28
By bal c/f 9730
Total 21850 Total 21850
Office fixtures a/c
Date Details Fol Amount Date Details Fol Amount
Feb 1 To capital a/c 800
Feb 5 To quick office
ltd
1100
Feb
15
To cash 70
Feb
28
To bank 620 Feb
28
By bal. c/f 2590
Total 2590 Total 2590
Loan from bank
Date Details Fol Amount Date Details Fol Amount
Feb
28
By bal. c/f 2500 Feb 2 By cash 2500

Total 2500 Total 2500
Trial Balance of S. Keyes as at 30 Feb 2019
Details Debit Credit
Quick office ltd 1100
Van a/c 35000
Cash a/c 3580
Bank a/c 9730
Capital a/c 47300
Office fixtures a/c 2590
Loan from bank 2500
Total 50900 50900
PART 4
a. Income Statement of Airman Co. for the year 30th September 2019
Details Amount
Sales 80000
Less: Sales return 2000
Net sales 78000
Less: COGS 66120
Opening stock 36000
Add: Purchases
(150000
-600) 149400
Add: Carriage inward 720
Less: Closing stock 120000
Gross profit 11880
Expenses:
Motor expenses 1200
Carriage outward 400
Rent 5000
Telephone charges 620
Wages and salaries 32000
Insurance 830
Office expenses 600
Sundry expenses 300

Total expenses 40950
Net loss -29070
The major cause behind the company incurring loss is that the company has exceeded
its total expenditure against its gross profit. If the company would have exercised control
over some of its expenses, it might have resulted into profits.
b.
It is being provided that the company had always been profitable and only this year
the company is into losses. The main reason behind this is that the company has been hit hard
by the coronavirus. Because of the rise of Covid-19, the revenue of an association has been
totally influenced (Ritter and Pedersen, 2020). The Airman Co has consistently been
beneficial however in the year 2020, the organization has been in misfortune which for the
most part in light of the decrease in the revenue. This has affected the pay of the organization
through revenue and alongside that there were some fixed costs the association needed to
incur regardless of whether the business was not running. This has influenced the pay
articulation of the organization. In view of Covid-19, it is clear that association’s supply
chain is totally influenced and this must be broke down by and large to choose the hindrance
in the business cycle. Capacities, for instance, stock outdated nature or cash creating business
units whose market value decline is a marker of exhaustion. The change in the days on
account of receivable which is because of sudden expansion in the time period would be
another inquiry to be replied and overseen (Fairlie, 2020). Along with that, there is also
disruption in the working capital cycle of the company since the company might not be able
to collect the due amount from its accounts receivables and which has resulted into the
situation of the cash crunch making the company unable to make payment to its creditors and
other financial obligations. Therefore, in this way, the company has not been able to
effectively manage its business in the time of pandemic which ahs resulted into turning its
profits into losses. Along with that, there are certain factors, like the disruption in the supply
chain and panic among the people resulted into reduction in sales.

REFERENCES
Books and Journals
Fairlie, R., 2020. The impact of COVID‐19 on small business owners: Evidence from the first
3 months after widespread social‐distancing restrictions. Journal of Economics &
Management Strategy.
Horvat, T. and Mojzer, J., 2019. Influence of Company Size on Accounting Information for
Decision-Making of Management. Naše gospodarstvo/Our economy. 65(2). pp.11-
20.
Joung, J. W. and Lee, S. H., 2017. The effect of information asymmetry between accounting
information provider and users on information user decision. Journal of
Convergence for Information Technology. 7(2). pp.125-130.
Ritter, T. and Pedersen, C. L., 2020. Analyzing the impact of the coronavirus crisis on
business models. Industrial Marketing Management.
Online
Baylus, E., 2017. Advantages & Disadvantages of an Accountant. [Online]. Available
Through:< https://bizfluent.com/info-8663780-advantages-disadvantages-
accountant.html>.