Business Transaction Recording and Financial Analysis

This report provides a comprehensive overview of recording business transactions. It begins by identifying key decision-makers in a business, such as management, shareholders, and investors, and how they utilize financial records. The report then explores formal and informal business structur...Read More

RECORDING BUSINESS
TRANSACTION

INTRODUCTION
Recording business transactions is all about recording business activities and
transactions of the business entity. This report will reflect different element associated with
recording the business transaction of the organisation. Henceforth report will emphasis over
decision makers related to the accounting records in the organisation. Different systems
related to recording business transactions will also reflect in this project. Furthermore, journal
entry will also project in this report. Ledger account will also provide in this report. Trail
balance will also be a part of this report. Furthermore, income statement will also be a part of
this report. Impact of the covid over business growth will also demonstrate in this project.
a) Assessment
a. Part 1. A Decision maker of business
All decisions in business are taken based on the financial records of the company.
Different decision makers are a part of the business as they take decisions on the basis of the
position of the company denoted in the financial statement prepared by the business entity.
Following are the stakeholders that are the key decision maker part of te business.
Management: Management of the company are involved in taking all the important decision
in the business. Management analysis the financial position of the company reflect in the
financial book of accounts such as financial statement, trading account, income statement,
balance sheet and cash flow statement (Blue and Grootenboer, 2019). As the financial
records is the financial reflection of the performance of the company in respective market.
Manager assesses the overall performance of the business entity on the basis of the financial
book of accounts and takes all decision in business according to the performance. They all
assess the profitability of the decision making on the basis of the position reflect in the
company’s book of accounts.
Shareholders: Shareholders are also among the prominent stakeholder part of the company.
They are the investors and owners of every business entity. All shareholders make the
decision related to the investment in the business operation based on the financial records of
the entity. They assess the financial records to interpret the overall performance of company
in market and make the best level of decision related to the investment they made (Eberhardt,
de Bruin and Strough, 2017). Shareholders also assess the dividend and profit share allocated
to the existing shareholders of company while making decision related to the investment in

the company. It is essential that shareholders assess the performance denote in the company
book of account while taking the investment decision in the business.
Investors: Investors are also among the most prominent external stakeholders associated
with the business operations. They make the best decision on the basis of the financial
performance denote in the financial records of the business entity (Ziolo and et.al., 2019). It
is significant that financial investor’s analysis the financial books of accounts such as income
statement, balance sheet and cash flow statement so that they can analysis the possibility of
the company in entertaining business operations in the near future. They make investment
decision only when they get to see any effective profit in the business in future. They also
assess the leadership of the company based of the financial performance reflect in the
company’s book of accounts.
The above mentioned are the most prominent stakeholders of company utilises
financial records for making the decision making related to incurring transactions with the
organisation. It is essential that the organization make decision on the basis of the
information reflect in the financial records of the organisation.
b. Part 1. B Profit business structure
Business structure denotes the organisation hierarchy of the company. Following are
the two business structure that denotes the significance of the accounting records in taking the
best level of decision related to the operations in organisation. Business structure is
prominently segregated into formal business structure and informal business structure.
Formal business structure: Accounting book of records allow the management in context to
the formal business structure for making the best level of decision related to the operations in
organisation (Litterscheid and Streich, 2020). The stakeholder’s part of such business entity
allows the company to analysis the financial records for taking any decision in regards to any
affairs with the entity. It is crucial that organisation make all decision based on the
information reflect in accounting books of company.
Advantage:
 It reflects the financial stability of company.
 It improves business decision making of company.
 It expand the profit possibility of the organisation.
Disadvantage:

 It do not reflect the impact factors create over organisation performance.
 This is the not sole basis of taking decisions.
Informal business structure: Informal business structure is another profitable business
structure. As the profitability immensely based on the decision making of the management in
organisation. All stakeholders make decision in respect to the operations with the business
entity only with the support of the information stated in the financial records of the
organisation (Peng and Huang, 2020). It is necessary that stakeholders assess the financial
records in the best way possible to take the best level of decision with the company.
Advantage:
 This allows the stakeholders to take the best level of decision.
 This reflects the financial stability of organisation.
Disadvantage:
 It reflect only the statistical factors of decision making
Part 2
Journal Entry
Date Particular Debit Credit
1 Feb,
2020
Asma Ltd. A/c
To Office Fixture a/c
(Being office furniture returned to the Asma
ltd. previously with allowance )
350
350
4 Feb,
2020
Bad debt a/c
To S. Keys
(Being Amount due from S.keys written off
as bad debts)
85
85
9 Feb,
2020
Machine a/c
To bank
To TS Co.
(Being machinery purchased for business
purpose and some amount paid through
2300
200
2100

cheque)
13 Feb,
2020
Bank a/c
Bad debts a/c
To S. Hill
(Being S. Hill declared as bankrupt and
amount due from him received partly in full
settlement)
220
50
270
20 Feb,
2020
Drawing a/c
To purchase a/c
(Being Goods taken by owner for personal
use)
180
180
26 Feb,
2020
Drawing a/c
To insurance
(Being insurance expense of private house
recorded as business expense, now rectified)
85
85
28 Feb,
2020
TS Co. a/c
To Bank
(Being partly payment made to TS Co. for
supplying machine )
2100
2100
PART-3
General ledger of Pearce & Co.
Capital Account
Date Particulars Amoun
t
Date Particulars Amount
01-02-2020 By Bank a/c 21500
By Van a/c 25000
28-02-
2020
To Balance
C/f
47300 By Office fixtures 800
Bank A/c
Date Particulars Amoun
t
Date Particulars Amount
01-02-
2020
To Capital
a/c
21500 03-02-2020 By cash a/c 1500

02-02-
2020
To Lloyds
Bank
2500 04-02-2020 By Van a/c 4800
25-02-
2020
To Cash a/c 350 19-02-2020 By Nissan Co. a/c 5200
28-02-2020 By Office Fixtures 620
28-02-2020 By Balance C/f 12230
Lloyds Bank Account
Date Particulars Amoun
t
Date Particulars Amount
02-02-2020 By Bank a/c 2500
28-02-2020 To Balance
C/f
2500
Cash Account
Date Particular
s
Amount Date Particulars Amount
03-02-
2020
To Bank
a/c
1500 15-02-
2020
By Office Fixtures
a/c
70
25-02-
2020
By Bank a/c 350
28-02-
2020
By Balance C/f 1080
Van Account
Date Particulars Amount Date Particulars Amount
01-02-
2020
To Capital
a/c
800
04-02-
2020
To Bank a/c 4800
08-02-
2020
To Nissan
Co.
5200 28-02-
2020
By Balance C/f 10800
Quick Office Ltd. Account
Date Particular
s
Amoun
t
Date Particulars Amount
05-02-2020 By Office
Fixtures
1100
28-02-
2020
By
Balance
C/f
1100
Nissan Co. Account

Date Particulars Amoun
t
Date Particulars Amount
19-02-
2020
To Bank
a/c
5200 08-02-
2020
By Van a/c 5200
Office fixtures Account
Date Particulars Amoun
t
Date Particulars Amount
01/02/202
0
To Capital a/c 25000
05-02-
2020
To Quick
Office Ltd.
1100
15-02-
2020
To Cash a/c 70
28-02-
2020
To Bank a/c 620 28-02-2020 By Balance
C/f
26790
Trial Balance as at 28th February 2020
Particulars Debit Credit
Capital a/c 47300
Bank a/c 12230
Lloyds bank 2500
Cash a/c 1080
Van a/c 10800
Quick Office Ltd. a/c 1100
Office Fixtures a/c 26790
TOTAL 50900 50900
Part-4
a) Income Statement for the period ending 30th September 2020
Particulars Amount
Sales
Less: Sales return
80000
(2000)
Less: Cost of Goods Sold
Opening stock 36000
Add: purchases 150000
Less: Return outwards (600)
Add: Carriage inwards 720
Add: Wages and salaries 32000
Less: Closing stock
(120000)
98120
Gross Profit (20120)
Less: Indirect Expenses
Motor expenses 1200

Rent
Telephone charges
Insurance
Office expenses
Sundry expenses
Carriage outwards
5000
620
830
600
300
400
Net Profit (29070)
b) Due to the emergence of coronavirus in 2019 and 2020, there are many effects on the
financial performance of the company which the companies seek to highlight it in
their income statement or balance sheet. It is being done in either way, both in
quantitative and qualitative form of information by including the same either inside or
outside the financial statements (Bartik and et. al., 2020). It is up to the companies
that how it determines and disclosing them into their income statements or in the
notes related to the accounts. As stated, that the company was profitable form last 10
years but from the above income statement it has been interpreted that the company
has got very low level of sales due to the sudden emergence of COVID-19 outbreak.
There is many impact that can be noticed from the above statement indicating income
of the Airman Co. are as follows:
 Firstly, there are very less sales as the company was unable to make sales as it
would have made otherwise if such pandemic crisis doesn’t take place. As
COVID-19 outbreak throughout the countries of the world, there was sudden
locking down in almost all countries of the world, causing inability among
businessmen to sell their products and services. The same reason holds true with
Airman Co., where the owner could not sell their products and services which
leads to low level of sales and high level of inventories that remain in the business
as reflected in the above income statement (Fairlie, 2020).
 Secondly, the cost of goods sold increases, as the company has made purchases
for carrying out their business activity and also company has paid wages and
salaries to their workers and employees which has add to their cost of goods sold
and accordingly lowers their gross profit margins as indicated above. It has been
clearly reflected in the income statement of Airman Co. where it has made profit
in the last 10 years but in this particular year, due to the rise of pandemic and its
resulting crisis, company has experienced negative gross profit margins.
 Again, it has been seen that fixed expenses must be made by the company, like
Airman Co. did, such as rents, telephone expenses and insurance in this example.

 Also, the company has broken its record of profit making that was taking place
from last ten years, but due to outbreak of COVID-19 the company has incur loss
both in terms of gross profit and net profit. Around 29000 loss has been incurred
by the company in this particular year. This is just because of companies inability
to do their business as it would have done and made enough sales which can
allowed it to earn profit as it was making in their historical record.
 All this impacts discussed here is quite common among many small, medium and
even large businesses as they have to compulsorily meet their employees payroll
and other related fixed nature of expenses.
CONCLUSION
Financial records allow the business entity to make the best level of decision by
assessing the financial statement of the company. They reflect the accounting perspective of
every decision made by the company. Stakeholders like shareholders, management and many
such take decision with doing affairs with company on the basis of the financial information
denote in the accounting book. Income statement, trial balance these are the primary records
that is being analysed to take the decision in business. In this report all the technique of
recording business transaction has been discussed with the help of common business
transaction and how businesses have been impacted due to the emergence of COVID-19
along with its corresponding impact on financial statements has been included in this report.

REFERENCE
Books and Journals
Blue, L. E. and Grootenboer, P., 2019. A praxis approach to financial literacy
education. Journal of curriculum studies. 51(5). pp.755-770.
Eberhardt, W., de Bruin, W. B. and Strough, J., 2017. AGING AND FINANCIAL
DECISION MAKING: OLDER AND WISER?. Innovation in Aging, 1(Suppl 1),
p.936.
Litterscheidt, R. and Streich, D. J., 2020. Financial education and digital asset management:
What's in the black box?. Journal of Behavioral and Experimental Economics. 87.
p.101573.
Peng, X. and Huang, H., 2020. Fuzzy decision making method based on CoCoSo with critic
for financial risk evaluation. Technological and Economic Development of
Economy. 26(4). pp.695-724.
Ziolo, M. and et.al., 2019. How to design more sustainable financial systems: the roles of
environmental, social, and governance factors in the decision-making
process. Sustainability. 11(20). p.5604.
Bartik, A. W., and et. al., 2020. The impact of COVID-19 on small business outcomes and
expectations. Proceedings of the National Academy of Sciences, 117(30), pp.17656-
17666.
Fairlie, R. W., 2020. The impact of COVID-19 on small business owners: Continued losses
and the partial rebound in May 2020 (No. w27462). National Bureau of Economic
Research.