University of West London: James' Business Accounting Project

This project analyzes the financial activities of James' new business in London for the month of September 2019. It begins with recording business transactions in a journal, followed by creating ledger accounts to track cash, bank, computer, capital, purchases, sales, and other relevant accounts. The project then constructs a trial balance to verify the accuracy of the ledger balances. Subsequently, it prepares an income statement to determine the net profit and a balance sheet to assess the financial position of the business. Furthermore, the project includes a ratio analysis to evaluate the company's performance, comparing it with industry averages to assess profitability, liquidity, and efficiency. The analysis provides insights into areas for improvement, such as profitability, liquidity and efficiency, and offers recommendations for enhancing the business's financial health and competitive edge. The project follows the guidelines provided in the assignment brief, including the use of double-entry bookkeeping, and the preparation of financial statements. The final section provides a conclusion and references to the sources used in the report.

Project

Table of Contents
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
a. Recording the business transactions ........................................................................................3
b. Ledger balances ......................................................................................................................4
c. Trial balance for the year ended 30th September 2019............................................................7
d. Preparing income statement for year ended 30th September 2019..........................................7
e. Framing balance sheet for the year ended 30th September 2019............................................8
PART-B...........................................................................................................................................8
1. ratios ........................................................................................................................................8
2. performance evaluation..........................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
Accounting is the practice or body of the knowledge that is concerned with the methods
which are used for recording the business transactions, keeping the financial records, performing
an internal audits and reporting the financial information to management. It is referred as the
systematic procedure that involves determining, recording, classifying , analysing, interpreting
and reporting the financial information to the users. It reveals an information regarding profits or
the moss incurred for an accounting period and in valuing the nature of an entity's assets, owners
equity and the liabilities. The present report is based on James who had started his new business
in the London on 1st September 2019. Furthermore, the report prepares for the accounts and their
balances with the financial statements. Moreover, by using the ratio analysis tool, the
performance of the James business is been evaluated by making comparison with the average
results of its competitor.
PART A
a. Recording the business transactions
James business
Journal
Date Particulars Debit (£) Credit (£)
01/09/19 Cash A/c Dr. 3200
Bank A/c Dr. 12000
Computer A/c Dr. 1000
To capital A/c 16200
02/09/19 Purchase A/c Dr. 900
To David A/c 900
03/09/19 Computer A/c Dr. 2000
To Bank A/c 2000
05/09/19 Bank A/c Dr. 500
To sales A/c 500

06/09/19 Purchase A/c Dr. 400
To cash A/c 400
10/09/19 Rent expense A/c Dr. 600
To cash A/c 600
12/09/19 Repair expense A/c Dr. 100
To cash A/c 100
18/09/19 David A/c Dr. 100
To purchase return A/c 100
21/09/19 Bank A/c Dr. 300
To rent received A/c 300
23/09/19 Joseph A/c Dr. 400
To sales A/c 400
23/09/19 Cash A/c Dr. 1500
To sales A/c 1500
24/09/19 Car A/c Dr. 1000
To Bank A/c 1000
30/09/19
Wages expense A/c
Dr. 700
To cash A/c 700
30/09/19 Drawings A/c Dr. 450
To cash A/c 450

25150 25150
b. Ledger balances
Ledger Accounts
Dr. Cash A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
01/09/19 To capital A/c 3200 06/09/19 By purchases 400
23/09/19 To sales A/c 1500 10/09/19
By rent
expense 600
12/09/19
By repair
expense 100
30/09/19
By wages
expense 700
30/09/19 BY Drawings 450
30/09/19 By balance c/d 2450
4700 4700
Dr. Bank A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
01/09/19 To capital A/c 12000 03/09/19 By computer 2000
05/09/19 To sales A/c 500 24/09/19 By car A/c 1000
30/09/19 By balance c/d 9500
12500 12500
Dr. Computer A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
01/09/19 To capital A/c 1000 30/09/19 By balance c/d 3000
03/09/19 To Bank A/c 2000

3000 3000
Dr. Capital A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
30/09/19 By balance c/d 16200 01/09/19 By bank 12000
01/09/19 By cash 3200
01/09/19 By computer 1000
16200 16200
Dr. Purchase A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
02/09/19 To David 900 30/09/19 By balance c/d 1300
06/09/19 To cash 400
1300 1300
Dr. David A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
18/09/19
To purchase
return 100 02/09/19 By purchase 900
30/09/19 To balance c/d 800
900 900
Dr. Sales A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
30/09/19 To balance c/d 2400 05/09/19 By bank 500
23/09/19 By Joseph 400
23/09/19 By cash 1500

2400 2400
Dr. Rent A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
06/09/19 To bank 600 30/09/19 By balance c/d 600
600 600
Dr. Repair A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
12/09/19 To cash 100 30/09/19 By balance c/d 100
100 100
Dr.
Purchase
return A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
30/09/19 To balance c/d 100 18/09/19 By David 100
100 100
Dr. Joseph A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
23/09/19 To sales 400 30/09/19 By balance c/d 400
400 400
Dr. Car A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
24/09/19 To bank 1000 30/09/19 By balance c/d 1000

1000 1000
Dr. Wages A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
30/09/19 To cash 700 30/09/19 By balance c/d 700
700 700
Dr. Drawings A/c Cr.
Date Particulars Amount (£) Date Particulars Amount (£)
30/09/19 To cash 450 30/09/19 By balance c/d 450
450 450
c. Trial balance for the year ended 30th September 2019
Trial Balance
Particulars Debit(£) Credit(£)
Bank 9200
Cash 3050
Computer 3000
Capital 16200
Purchase 1300
Sales 2400
Payables 800
Receivables 400
Rent 600
Repair 100
Purchase return 100
Rent received 300
Car 1000

Wages 700
Drawing 450
Total 19800 19800
d. Preparing income statement for year ended 30th September 2019
Profit and loss statement
Particulars Amount Total
Sales 2400
Add: Other income (rent
received) 300
2700
less: COGS 950
Gross profit 1750
less: Operating expenses
Rent 600
repair 100
wages 700 1400
Net profit 350
Working note:
Particulars Amount
Opening stock 0
add: Net purchases 1200
less: closing stock 250
COGS 950

e. Framing balance sheet for the year ended 30th September 2019
Balance sheet
Particulars Amount Total
Liabilities
Capital 16200
Add: profits 350
Less: Drawings 450 16100
Current liabilities
Payables 800
Total liabilities 16900
Assets
Fixed assets:
Computer 3000
Car 1000 4000
Current assets:
Cash 3050
Bank 9200
Closing stock 250
Receivables 400 12900
Total assets 16900
PART-B
1. ratios
Ratio analysis- It refers to the quantitative technique that helps in gaining a deeper
insights towards company's liquidity and an operational efficiency of the company through
making a comparison of an information that is been contained in the final reports of an

organization (Sashegyi and Ferry, 2017). It provides for a comparison of the line items that is
been interpreted in financial statements of the business.
Ratio analysis
Particulars Amount Competitors average
Gross profit 1550
Revenue 2400
GP margin= Gross
Profit /sales*100 64.58 65.00%
Net profit 450
Revenue 2400
NP margin=Net profit
/sales revenue*100 18.75 28.00%
Current asset 12900
Current liabilities 800
Current ratio=
Current
assets/Current
Liabilities 16.13 2.1
Current asset-inventory 12500
Current liabilities 800
Quick/ acid test
Ratio= Quick
assets/Current
liabilities 15.62 1.5
Receivables 400
Revenue 2400
Receivable days= 60.83 47

Average
receivables/sales
revenue*365
Payables 800
Purchases 1300
Payables days=
Average
payable/purchases*36
5 224.62 65
2. performance evaluation
From the above assessment it has been analysed that performance of James is not seen as
better in comparison to its competitors as the net profit ratio of its rivalry is greater. This reflects
that James business is generating lower profits than its competitors after making payment of all
its expenses, costs and the tax expenses of the firm (Farrés and et.al., 2015). Thus, profitability
performance of James business is not good than its competitors so it should look for corrective
actions in order to improve its sales, reduce its expenses that in turn results in higher profitability
in the business. Furthermore, the liquidity ratio includes current and acid test ratio that helps in
measuring the short term liquidity position of the business in comparison to the its competitors
business. The current and quick ratio of James business is reflected as too high than its
competitors average which means that his business is not making effective and efficient use of its
assets in order to fulfil its short term obligations.
Moreover, it has been assessed that accounts receivable and the payable days of James
business resulted as very much high which in turn clearly indicates that his enterprise is taking
ample of time in making the payment to its creditors an receiving the payment form its debtors.
However, the receivable and the payable days of his rivalry is lower than his business which
means that his competitor is more and more efficient in collecting the amount owed and paying
the due amount on time or within the adequate time frame (Manabe and et.al., 2016). Thus, these
results shows that profitability, efficiency and liquidity position of James competitor is better

than his business and he needs to seek for appropriate measure for improving its performance
and position in the overall market and attaining a competitive edge against the competitor.
CONCLUSION
By summarising the above report it has been concluded that accounting plays an
important role in continuing the business as it enables in tracking the expenditures and an income
by ensuring for statutory compliance. It also provides adequate and true information in relation
to the profitability and the position of the company to the internal and the external parties that
could be used by them in making suitable decisions. Ratio analysis also acts as the major tool in
evaluating and analysing financial information of an entity in respect of the profitability,
efficiency, risk. It is the tool that helps in comparing trends of the two or more of the company
over an accounting period.

REFERENCES
Books and journals
Farrés, M. and et.al., 2015. Comparison of the variable importance in projection (VIP) and of
the selectivity ratio (SR) methods for variable selection and interpretation. Journal of
Chemometrics. 29(10). pp.528-536.
Manabe, S. and et.al., 2016. New stutter ratio distribution for DNA mixture interpretation based
on a continuous model. Legal Medicine. 19. pp.16-21.
Sashegyi, A. and Ferry, D., 2017. On the interpretation of the hazard ratio and communication
of survival benefit. The oncologist. 22(4). pp.484-486.
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