University of West London: Recording Business Transactions Project A1

This document provides a comprehensive solution to a recording business transactions project. It begins by identifying key decision-makers in accounting and their information needs, focusing on a large, publicly listed company. It then analyzes the advantages and disadvantages of different for-profit business structures from an accountant's perspective. The solution proceeds with detailed journal entries for David Wise's business, followed by the preparation of ledger accounts and a trial balance for Pearce & Son's business. Finally, it presents an income statement for Airman Company and discusses the potential impact of COVID-19 on the company's profitability. The assignment covers various aspects of financial accounting, including transaction recording, financial statement preparation, and financial analysis.

RECORDING BUSINESS
TRANSACTION PROJECT
A1

Table of Contents
MAIN BODY...................................................................................................................................3
PART 1............................................................................................................................................3
a) Major decision makers of accounting and need of financial information...............................3
b) Advantages and Disadvantages of Recording Financial information are enumerated below 4
PART B............................................................................................................................................6
Journal Entries of David wise Business:.....................................................................................6
PART 3............................................................................................................................................7
a) Preparing Ledger accounts of Pearce & son's business:.....................................................7
b) Trial Balance as at 28 February 2020...................................................................................11
PART 4..........................................................................................................................................12
a) Income Statements of Airman Company for the year ended 30 September 2020................12
b) Possible impact of coved 19 on Airman Company's income statement of profitability
during 10 years since 2009........................................................................................................13
REFERENCES..............................................................................................................................14

MAIN BODY
PART 1
Accounting is process of recording, summarizing, and analysing all business transaction.
It provides concise summary of financial transaction over a period of time. It helps organizations
to take decision based on this information
a) Major decision makers of accounting and need of financial information
There are 3 types of users of financial information whose objective is to study the data
widely and taking decision based on these figures.
Internal Users:
Accounting provides financial information to managers that is useful for them in
decisions regarding management of company, Asda store Ltd uses these figures to manage their
internal structure of firm in various forms like assessing how management has discharge its
responsibility for protecting and managing organization's resources. They also use this
information for shaping decision regarding expansion and downsizing and when to borrow or
invest company’s resources (Garbowski and et.al., 2019.). Internal users like managers, owners,
officers, internal auditors, directors and employees. All these users are interested in the
accounting information as they come to know about the profitability of the company and with
help of this they can take major decisions relating to increasing the profitability and effective
management of the company.
External Users:
External entities use these accounting information for many purposes. These users are
divided into six categories. Creditors and investors are the most common external users among
other external users.
 Creditors and lenders: loan providing banks and companies use these financial data to
determine that the company has credit worthiness or not, the company will be able to pay
back or will declared bankrupt.
 Employees and their unions: Does The Organization like Asda Store Ltd has the ability
to provide long term employment to its workforce also the organization can increase the
pay scale of employees or not.

 Customers: consumer also keep eye on company's information to check that the firm
will survive enough to honour its warranty policies and are they providing good quality
products at fair prices.
 Trading Partner: business needs business to do business, associated trading a company
look at the information to identify that they should do particular economic activity or not.
 Government Unit: government uses company's financial data to protect interest of
stakeholders and shareholders (McCallig, Robb and Rohde, 2019). So that firm can have
fear of rules and regulation of Govt. and practice fair activities only. General Public: Public also use this information for decision- making that organization
is providing good products without harming environment.
Government/ IRS:
Govt. agencies that uses and track the tax are interested in company's financial
information. They check that the firm is paying taxes according to current tax law or not.
Government uses these data to decide the tax and these charges decide organization's
profitability.
These are various needs of financial information of company for decision makers of Asda
store Ltd.
b) Advantages and Disadvantages of Recording Financial information are enumerated below
Financial accounting is the process of recording all business transaction in form of
financial statements (Roberts, 2020.). It aims at delivering fair and accurate data to stakeholders
so proper decision can be taken and transparency can be maintained.
Advantages:
 Maintain Business Records: it records each and every monetary transaction of business
unlike human memory which has limited capacity to remember things financial
accounting can record large amount of transaction.
 Prevention and Detection of Fraud: It represents each and every transaction so true
picture of business can be revealed and it also provides time to time information to
internal management so real idea of resources can get through these data.
 Acts as legal Evidence: Financial accounting serves as legal evidence that can be used to
overcome business disputes (Muslichah and et.al., 2020.). Misunderstanding and
confusion can be avoided through these financial legal statements.

 Assist The Management: Managers of company become dependent on these financial
data for managerial decision- making. It provides full information regarding cash inflow
and outflow of the company, they anticipate surplus and deficit on the basis of these data. Comparison of Results: Financial information helps in comparing performance of
business organization (Weygandt, Kimmel and Kieso, 2019.). It records systematic data
for years which helps the company in comparing its previous and new market position.
Disadvantages:
 Records only Financial Aspect: The foremost disadvantage is that it records only
financial aspects of business transactions. It does not consider various non-financial
transaction such as economic condition, political condition, government rules and
regulation and market condition. All these factors have impact on fluctuation of business.
 Historic in Nature: It provides historical information to the company, it does not give
day to day data it only gives accounting information of a particular accounting year
which does not show accurate position of a business (Schroeder, Clark and Cathey, 2019).
All the management decisions are taken on these historical data but predicting future with
help of historical data is not appropriate.
 Provide Insufficient Information: Financial accounting does not provide the detailed
information related with product, service, department, process etc. it presents whole data
in the terms of assets, liability, profit and loss, all these results in incomplete decision-
making.
 May be Manipulated: management can change the figures and can represent high
profitability to attract shareholders or reduce profit to evade tax in case of their interest.
 Record Actual Cost: Financial accounting does not consider the price fluctuation and
record actual cost which does not provide accurate position of the firm. It presents
inaccurate data as assets value is always changing and its does not record changes.
Sole proprietorship is not legal entity in which one person is responsible for all
transaction so recording all financial transaction would be beneficial for such firm because it will
provide him summary of all business transaction which he may not be able to remember after a
duration of time and disadvantage can be wastage of time as sole proprietor does not deal in
large business transactions so it will be wastage of resources for him.

Partnership business are those firm which have profit or loss sharing between two or
more persons, recording financial data can provide advantage to firm in such a way that it can be
reasons for trust between partners, each partner can use these as evidence in case of any disputes.
PART B
Journal Entries of David wise Business:
DATE Particulars L.F DEBIT CREDIT
02/01/20 Asma ltd A/c dr. 350
To Office Fixtures A/C 350
(being office fixtures returned to supplier
Asma ltd)
02/04/20 Bad debt A/C dr 85
To s.keyes A/C 85
(being bad debt written off)
02/09/20 Machinery A/C dr 2300
To bank A/C. 200
To TS co A/C 2100
(being part of manichary bought for cash
and other part bought for credit)
01/02/13 Bad Debt recovered A/C dr 220
bad debt A/C Dr 50
To S.Hill A/C 270
(being bad debt written off and recovered
220 only)

01/02/20 Drawings A/C dr. 180
To purchase A/C 180
being goods taken for personal use by
proprietor)
01/02/26 Drawings A/C 85
to cash A/C 85
(being personal insurance premium paid
by proprietor)
01/02/28 T.S co A/C 1050
To Bank A/C 1050
(being half machinery debt paid by issuing
cheque)
PART 3
a) Preparing Ledger accounts of Pearce & son's business:
JOURNAL
Date Particulars L.F Debit Credit
01/02/20 Bank A/C Dr. £21500
Office Fixtures A/C Dr. £800
Van A/C Dr. £25000
To capital A/c £47300
(being proprietor invested capital in business )
02/02/20 Cash A/C Dr. £2500
To Lloyds Bank A/C £2500

(being loan received )
03/02/20 Cash A/c Dr. £1500
To bank A/C 1500
(being cash withdraw from bank account)
04/02/20 Van A/C Dr. £4800
To bank A/C £4800
(Being Van purchased)
05/02/20 Office fixtures A/c Dr. £1100
To Quick office Ltd £1100
(being office fixtures purchased on credit)
08/02/20 Van A/C Dr. £5,200
To Nissan co. Ltd £5,200
(Being Van purchased on credit)
15/02/20 Office fixtures A/c Dr. £70
To cash A/C £70
20/02/20 Nissan Co, Ltd £5200
To bank A/C £5200
(Being debt paid)
25/02/20 Bank A/C Dr. £350
To cash A/C £350
(Being cash deposited into bank A/C)
28/02/20 Office fixtures A/c Dr. £620

To bank A/C £620
(Being fixtures purchased)
Dr. Bank A/C Cr.
Date Particulars J.F Amount date particulars J.F Amount
01/02/20 to capital A/c 21500 03/02/20 By Cash A/c 1500
04/02/20 By Van A/C 4800
25/02/20 To cash A/C 350 20/02/20 By Nissan Co, Ltd 5200
28/02/20 Office fixtures A/c 620
28/02/20 By balance c/d 9730
21850 21850
Dr. Cash A/C Cr.
Date Particulars J.F Amount date particulars J.F Amount
02/02/20 To Lloyds Bank A/C 2500
03/02/20 To bank A/C 1500 15/02/20 By office fixtures A/c 70
25/02/20 By Bank A/C 350
28/02/20 By balance c/d 3580
4000 4000
Dr. Office fixtures A/C Cr.
Date Particulars J.F Amount date particulars J.F Amount
01/02/20 To capital A/c 800 28/02/20 By balance c/d 2590
05/02/20 To Quick office Ltd 1100

15/02/20 To cash A/C 70
28/02/20 To bank A/C 620
2590 2590
Dr. Van A/C Cr.
Date Particulars J.F Amount date particulars J.F Amount
01/02/20 To capital A/c 25000 28/02/20 By balance c/d 35000
04/02/20 To bank A/C 4800
08/02/20 To Nissan co. Ltd 5200
35000 35000
Dr. Quick Office A/C Cr.
Date Particulars J.F Amount date particulars J.F Amount
28/02/20 By balance c/d 1100 05/02/20 Office fixtures A/c 1100
1100 1100
Dr. Nissan co. A/C Cr.
Date Particulars J.F Amount date particulars J.F Amount
20/02/20 To bank A/C 5200 08/02/20 By Van A/C 5200
5200 5200

Dr. Lloyds Bank A/C (loan) Cr.
Date Particulars J.F Amount date
particular
s J.F Amount
28/02/20 By balance c/d 2500
By cash
A/c 2500
2500 2500
Dr. Capital A/C Cr.
date Particulars J.F Amount date particulars J.F Amount
28/02/20 By balance c/d 47300 01/02/20 By Bank A/C 21500
01/02/20
By Office Fixtures
A/C 800
01/02/20 By Van A/C 25000
47300 47300
b) Trial Balance as at 28 February 2020
Particulars Debit Credit
Bank A/C 9730
Cash A/C 3580
Office fixtures A/C 2590
Van A/C 35000
Quick Office A/C 1100
Lloyds Bank A/C 2500
Capital A/C 47300

Total 50900 50900
PART 4
a) Income Statements of Airman Company for the year ended 30 September 2020
REVENUES :
Sales 80000
(sales return ) 2000
Total Revenue 78000
(Cost of goods sold) 66120
Gross profit 11880
EXPENSES :
carriage outward 400
Rent 5000
motor expenses 1200
telephone charges 620
insurance 830
office expenses 600
sundary expences 300
TOTAL EXPENSE 8950
NET INCOME 2930
From Income statement it can be evaluated that gross profit after deducting direct
expenses is 11880 and after deducting indirect expenses like the net income is 2930, through it

can be stated that company is earning good profit. To increase more profit the company should
reduce irrelevant expenses and invest in marketing and product quality.
b) Possible impact of coved 19 on Airman Company's income statement of profitability during
10 years since 2009
Airman company has been profitable since 2009 but the situation of covid 19 has created
huge difference in its earning as compared to before. The Firm has faced many problems due to
this pandemic, has suffered from low profitability, the result is that the sale of products of
company has reduced, expenses has increased (Nwaukwa and Okolocha, 2020.). The business is
struggling to cope with financial strain.
Sales of Company: sales of company have reduced due to covid 19 because there was
lock down for a duration and when market opened people were afraid and still have fear to buy
products and use any services. The sales since 2009 was always growing and had good market
share. The firm was having good profitability as compared to year 2020.
Rent: Rent of organization since 2009 was easy to pay due to good profitability, now it
has become difficult to pay as company have low sale its source of fund has become weak so
paying rent has become problem for company (Kimmel, Weygandt and Kieso, 2018.).
Inventory Turnover: Inventory turnover has been disturbed due to low sales of goods
and also warehouse charges are also high which has become additional cost to the company.
Since 2009 the inventory turnover was functioning smoothly (Yu, Lin, and Tang, 2018.)

REFERENCES
Books and journals
Garbowski, M. and et.al., 2019. Financial accounting of E-business enterprises. Academy of
Accounting and Financial Studies Journal. 23. pp. 1-5.
Kimmel, P. D., Weygandt, J. J. and Kieso, D. E., 2018. Financial accounting: Tools for business
decision making. John Wiley & Sons.
McCallig, J., Robb, A. and Rohde, F., 2019. Establishing the representational faithfulness of
financial accounting information using multiparty security, network analysis and a
blockchain. International Journal of Accounting Information Systems. 33. pp. 47-58.
Muslichah, M., and et.al., 2020. The Adoption of Financial Accounting Standards for Small
Medium Enterprises by Muslim Entrepreneurs. Journal of Accounting, Business and
Management (JABM). 27(1). pp. 54-65.
Nwaukwa, F. C. and Okolocha, C. C., 2020. Effect of Think-Pair-Share Instructional Strategy on
Students’ Academic Achievement and Self-Efficacy in Financial Accounting in Abia
State. International Journal of Recent Innovations in Academic Research. 4(1). pp. 37-
48.
Roberts, J., 2020. The boundary of the ‘economic’: Financial accounting, corporate ‘imaginaries’
and human sentience. Critical Perspectives on Accounting. p. 102203.
Schroeder, R. G., Clark, M. W. and Cathey, J. M., 2019. Financial accounting theory and
analysis: text and cases. John Wiley & Sons.
Weygandt, J. J., Kimmel, P. D. and Kieso, D. E., 2019. Financial accounting. John Wiley &
Sons.
Yu, T., Lin, Z. and Tang, Q., 2018. Blockchain: The introduction and its application in financial
accounting. Journal of Corporate Accounting & Finance. 29(4). pp. 37-47.