Business Transactions: Recording, Analysis & Financial Statements

This report details the process of recording business transactions, starting with journal entries and posting to ledger accounts. It covers the extraction of a trial balance and the preparation of an income statement and statement of financial position. The report includes a letter addressing the treatment of drawings as business expenses. Furthermore, it calculates and analyzes financial ratios, comparing them with competitor averages and discussing the impact of the COVID-19 outbreak. The analysis covers net profit margin, gross profit margin, current ratio, acid test ratio, and account receivable/payable collection periods, providing insights into the company's financial health and efficiency. The report concludes by emphasizing the importance of accounting in providing information for decision-making and highlights key findings from the financial analysis.

Recording Business
Transaction

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
Recording of transaction in T- accounts.....................................................................................3
Balancing the accounts and bringing down the opening balance...............................................5
Extracting the trial balance........................................................................................................11
Preparing the income statement................................................................................................12
Preparation of financial statement.............................................................................................13
Letter to Anne...........................................................................................................................14
PART B..........................................................................................................................................15
Calculating the ratios of company.............................................................................................15
Comparing the performance with that of competitor’s average and impact of COVID 19
outbreak on average ratio..........................................................................................................16
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................19

INTRODUCTION
Recording the business transaction is being stated as recording of each and every
business activity within the company. This is necessary for the reason that when the company
will be recording each and every transaction then this will provide net profit or loss being faced
by the company. in the present case the company will outline the recording of different
transaction which business incurred within a month. Further the posting will take place into the
ledger and thereafter trial balance will be created. After this the preparation of financial
statement will be undertaken in order to assess the profitability of the company and financial
position. In the end the ratios will be calculated for the company and comparison with the
competitor’s average ratio will be undertaken.
PART A
Recording of transaction in T- accounts
The accounting is being defined as the process of recording, posting and summarising the
transaction of business which are in financial terms are being recorded and communicated. For
the business to be successful it is necessary for the company that they implement effective
accounting within the company (Thottoli, 2020). Hence, the first step in accounting involves
making journal wherein company records each and every financial transaction within the books
of accounts.
Journal

Balancing the accounts and bringing down the opening balance
After the journalising of transaction, it is necessary for company to post them into ledger
account. Within the ledger the individual transactions are being posted into the relevant accounts
for making the trial balance further. The reason behind this fact is that it will assist the company
in analysing and knowing the individual balance of each and every account (Tanujaya and Reny,

2022). Within the ledger all the individual account is being created and then balance is brought
down for the future undertaking.

Extracting the trial balance
After posting, comes the making up of trial balance as it is referred to as the statement
relating to noting down all the balances of the ledger in debit and credit column. The trail
balance is being referred to as the statement which contains the details of all ledger balances and
totalling the debit and credit sides (Zhang, Pourroostaei Ardakani . and Han, 2021). This trial
balance is important for the company in order to check the fact that whether the debit and credit
side of the trial balance. The trial balance for Anne is as follows-

Preparing the income statement
The income statement is very crucial for companies to prepare because it summarise the
financial performance of company. This statement outlines the profit earned or loss incurred by
company. under the income statement all the expenses of company are deducted from the total
income. In case the income is more than expenses then profit is earned and in case expenses are
more than loss is being faced by the company. this income statement assists the company in
evaluating the performance of the company and take proper decision for improving the
profitability of company.