Recording Business Transactions: Analysis & Financial Forecasting

This report provides a detailed analysis of recording business transactions, emphasizing its importance for business success and profitability. It covers the steps involved in setting up a sole trader business, the role of accounting in decision-making for stakeholders like owners, investors, and government, and the process of recording transactions in journals and extracting trial balances for financial statement preparation. The report includes practical examples of ledger entries and demonstrates how to forecast profit or loss using a linear equation. The conclusion underscores the significance of accurate transaction recording for assessing a company's financial health and making informed decisions. Desklib offers a wealth of similar solved assignments and past papers for students seeking to deepen their understanding of finance and accounting principles.

Recording Business
Transactions

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
PART A...........................................................................................................................................3
1...................................................................................................................................................3
2...................................................................................................................................................4
PART B............................................................................................................................................6
1...................................................................................................................................................6
2...................................................................................................................................................7
PART C..........................................................................................................................................10
A................................................................................................................................................10
B................................................................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
For the success of the business it is very essential that all the business transaction is
recorded in proper and effective manner. This is essential for the reason that in case the financial
transaction will not be recorded then this will be affecting the profitability of the business
organization. Thus, it is very crucial for the business that they must effectively work and record
all the business transaction so that effective working of the business can be measured. The
present study will outline the recording of various transaction within books of accounts and then
the extracting trial balance and financial statements.
PART A
1
There are many different types of business which a person can run and operate and for
this it is very essential for the person to have good knowledge relating to working of business
(Zhang, Pourroostaei Ardakani and Han, 2021). this is particularly because of the reason that in
case the person is not having good knowledge relating to business operation then this will be
affecting the business. in the present case of David Green, wants to set up the sole trader
business of decorator. Thus, in order to start up a sole trader business there are some of the steps
which need to be followed. These steps are as follows-
The first and foremost step which David Green need to analyse and check that whether
they are eligible for being self- employed or not. This is necessary to ensure because in case the
person is not eligible for starting the business as sole trader then the whole process will be waste.
Hence, for this it is essential that David must first check the fact that whether he is eligible for
sole trader business as decorator or not.
Further, after checking all the requirement, the next step comes of the selecting the name
of the business. this name is the one through which the company will be denoted within the
competitive market (Barrow, Barrow and Brown, 2018). This is very essential for the reason that
when the company is started then it is only known by the exclusive name and not by the owner.
Hence, this is next step wherein David will decide that by which name the company will be
known within the external environment.
In addition to this, the next step will involve the checking of all the records and
requirement necessary for the effective starting up of the business. This involves analysing the

resources required, total finance needed to operate and initiate the business. this also involves
analysing the legal requirement which David might face in analysing and evaluating the working
of the business. Thus, this step will evaluate and highlight the fact that analysis of the resources
beforehand is very essential (Barrow, 2021). This also involve analysing all the requirement
relating to the banking as well. this is necessary because of the reason that when the bank
requirements will not be met then this will be impacting the working of the company to a great
extent.
In the end the last step is to analyse and understand the tax requirement relating to the
business. Hence, by the completion of this step, David can start the business as the decorator.
The tax is also a crucial element while working in the external environment as the business had
to pay the tax on the profit earned by the business (Oladunjoye, 2018). This is particularly
because of the reason that when the all these steps will be completed then they can run the
business as the sole trader dealing as a decorator. By following all these steps it is very essential
for the David to open the business as a sole trader and run it successfully and in effective
manner.
2
The accounting is recording of financial transaction and summarising and communicating
the results to the interested party for decision making. In this, all the internal and external parties
are referred to as the decision makers. With respect to the large company listed on London stock
exchange, Next plc, the decision makers involve all the people interested within the performance
of the company. majorly the decision making here are the owners of the company (Teru, Idoku
and Ndeyati, 2017). it is necessary for the owners of the company that they must analyse the
financial position of the company by evaluating the financial statements. In addition to this, the
employees as well require the financial statements in order to analyse and evaluate the fact that
how much the company has earned because of the hard work of employees. Moreover, other than
these internal stakeholders, there are also some of the external people as well who are interested
in the working of the company.
Out of the external stakeholders, the most interested is the investors that is the person
who want to invest within the company. This is particularly because of the reason that when the
person wants to invest in any of the company then firstly they will analyse the financial
statements that is how much profit is being earned by the company. hence, the financial

statement will assist the investor to decide that whether the investment within the company will
be beneficial for them or not (Huerta and Jensen, 2017). Along with this another decision maker
who can use the financial position is the government. This is a decision maker because they will
evaluate the profit earned by the company and then in accordance to it, will charge the tax to the
company. Hence, it will guide the government of the country to effectively charge the taxes.

PART B
1

2
Ledgers

PART C
A

B
With the help of the above equation, the profit or loss for the next year can be forecasted which
is as follows-
Y = -13267 X + 121793
Placing X with 10, the forecasted profit or loss will be calculated which is as follows-
Y = -13267 (10) + 121793
Y = -132670 + 121793
Y = -10877
Thus, with the help of the above forecasted data it can be seen that the company will
suffer a loss in the next year as well. This loss will account to 10877 which is being forecasted
for the company in the year 2022. Thus, with the analysis is can be stated that in the year 2022
the company is suffering loss but this is less than the loss incurred in 2021. Hence, it can have
implied that because of the current pandemic situation, the company is facing the loss and it is
very crucial for the business to undertake and implement strategies to convert the working in
profits.
CONCLUSION
By evaluating the above analysis, it is inferred that recording the business transactions is
very important and crucial for the business. This is necessary because of the reason that when all
the business transaction is recorded then this will outline the profitability of the business. the

above study also concluded that recording transaction in journal and extracting trial balance is
very essential for making of the financial statements. Moreover, the study also highlighted that
making the profit and loss is very important as it provides the actual earning of the company and
basis for the decision making of the company.