Analyzing Business Transactions and Financial Reporting: A Report

This report comprehensively examines the process of recording business transactions, encompassing journal entries, ledger accounts, and trial balances. It begins with an introduction to business transactions, emphasizing their importance in financial reporting and decision-making. The report then delves into specific examples, including journal entries with narrations for various transactions and the preparation of ledger accounts and trial balances. Furthermore, it includes the creation of income statements, analysis of the impact of COVID-19 on financial statement items, and a detailed ratio analysis. The report concludes with a summary of key findings and recommendations for effective financial management, providing a valuable resource for students and professionals alike.

Recording Business
Transactions

Table of Contents
INTRODUCTION...........................................................................................................................1
ASSESSMENT 1.............................................................................................................................1
PART 1............................................................................................................................................1
Decision makers and their need for accounting information: .....................................................1
Advantage and Disadvantage of recording accounting information:..........................................2
PART 2............................................................................................................................................3
Journal entries with narration for the David wises:.....................................................................3
PART 3............................................................................................................................................4
Ledger and trail balance of Pearce & sons:................................................................................4
PART 4............................................................................................................................................6
Income statement for Airman co.:...............................................................................................6
Impact of COVID 19 on company income statement items:.......................................................6
ASSESSMENT 2.............................................................................................................................7
PART A...........................................................................................................................................7
Journal transactions of T- accounts:............................................................................................7
Balance the accounts and an opening balances:..........................................................................8
Trial balance:.............................................................................................................................11
Income statement for the period 31st Oct. 2020:.......................................................................12
Preparation of financial position 31st Oct. 2020:......................................................................12
PART B..........................................................................................................................................13
Ratio calculation for Linda's business:......................................................................................13
Analysis of ratio analysis in comparison to its competitors:.....................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
A business transaction is an event that includes transactions of goods, money and services
between two or more than two parties. Business transactions are events that must be measurable
in money and recorded in accounting system. For example; Buying machinery from suppliers.
Business transactions are activity which is measured in monetary terms and which affects the
financial position of the company. These transactions affects on such accounting elements-
capital, assets, liabilities, expenses and income (Brennan, Canning and McDowell, 2020).
Business transaction recording are important in any business in order to know about its financial
position and growth. This report is based on various companies business records. This covers
topics such as journal, ledger and trial balance. Apart from this it also covers cash account and
ratio analysis in comparison to competitors.
ASSESSMENT 1
PART 1
Decision makers and their need for accounting information:
Financial accounting is a element of accounting that oversee the position of the company.
Under standard guidelines, transactions are summarising, recording and presented in the financial
statements such as profit and loss account and balance sheet. These statements are known as
external because they used to given to the outside of the company such as clients and
shareholders. The reason behind it financial statements are used by various people in various
ways, it has common standard that is known as Accounting standard and Generally accepted
accounting principles (GAAP) (Chaffey, Edmundson-Bird and Hemphill, 2019). It provides
information to managers so that they can make decisions regarding companies activities.
Investors and analyst also used this information for the valuation and worth of the company in
order to allow them to set prices and shares prices. Financial account is helps firm to track its
activities for future decision-making. It also helps companies for day to day activities and
identify what can give it future benefits for its growth.
Financial accounts shows all the information related to monetary terms of the company
which helps management and shareholders in order to decision-making process. This helps
management for knowing resources which are profitable to company and which gives insight to
managers for budget making (Chen, Liao and Wang, 2020). Through this company can compare
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itself by past data and know the reasons regarding changes in the year. The information is used
by internal managers such as internal decision making, also helps in hiring, compensation, sales
and promotional activities, marketing, investment etc.
Advantage and Disadvantage of recording accounting information:
Accounting refers to a process in which financial transactions of the businesses are
recorded. The process of accounting includes summarising, analysing and reporting those
transactions which are related to oversight agencies, regulatory bodies and tax collection
companies. It is useful in business for measurement, processing and communication of financial
information for running its activities (Samuels, 2019). It helps managers for decision making
regarding sales, activities, promotional activities, employees hiring and investments. it has
common standard that is known as Accounting standard and Generally accepted accounting
principles (GAAP).
Advantages: Mentioned below are some advantages related to recording accounting
information:
 Main business records: Accounting shows each and every transaction of the business
finance because it systematically maintain the books of all business monetary
transactions. It helps in tax paying and to estimate about the budget. It records all
transactions that are occurs in its day to day activities in credit and cash basis. For
example, if company buy furniture that it records it in its accounting books (Johnson,
2015).
 Helps in preparing financial statements: Preparation of financial statements is
necessary for knowing all losses and profits and real value of the organisation. It helps in
knowing all relevant accounting data for the preparation of financial statements such as
profit and loss account (Rezaei, ed., 2017). Through journal, ledger and trial balance
companies prepares its financial statements as p & l and balance sheet.
Disadvantages: Disadvantages of recording transactions are mentioned below:
 Provides insufficient information: Financial accounting not provides detailed
information related to different department and processes and other activities within the
organisation. It provides information of whole organisation as an unity liabilities, assets,
loss and profits of organisation. It refers overall transactions of the company at a one
place only without any department guidelines.
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 Records actual cost: It does not considers price fluctuations that are taking place time to
time, it records historical information or the actual cost of acquisition of assets. The value
of not always remains the same and it changes with the time. Financial accounting shows
inaccurate data and based on past transactions (Laudon and Traver, 2016).
PART 2
Journal entries with narration for the David wises:
Journal Entries
S. NO Date Particulars L.F £ £
1 01/02/20 purchase return A/C Dr. 350
To Purchase A/c 350
( Being purchase return with full
settlement)
2 04/02/20 Bad debts A/c Dr. 85
To S. keys A/c 85
(being debt debt written off by S.
keys)
3 09/02/20 Machinery A/c DR. 2300
To Bank 200
To TS CO. 2100
( Being machinery purchase with
cash Rs. 200 and 2100 on credit)
4 13/02/20 Cash account 220
Bad debts A/c 50
To S. hill Ltd. 270
( money owed by S. hill 270 and
paid only 220, Rs. 50 declare as
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bad debts)
5 20/02/20 Drawing A/s Dr. 180
To Stock 180
6 26/02/20 Insurance A/c Dr. 85
To Cash A/c 85
( Business paid money for
private house insurance)
7 28/02/20
Machinery A/c
DR. 1050
To bank A/c 1050
(amount paid by TS CO. for half
amount credit on machinery)
Total 4320 4320
PART 3
Ledger and trail balance of Pearce & sons:
A. General ledger
Ledger Accounts
(Amounts in GBP)
Capital Account
Date Particulars Amt. Date Particulars Amt.
01/02/20 By Bank A/c 21500
01/02/20 By Van A/c 25000
01/02/20 By Office Fixture A/c 800
29/02/20 To Balance c/f 47300
Total 47300 Total 47300
4

Bank Account
Date Particulars Amt. Date Particulars Amt.
03/02/20 By Cash A/c 1500 01/02/20 To Capital A/c 21500
04/02/20 By Van A/c 4800 02/02/20 To Loan A/c 2500
19/02/20 By Nissan Co. A/c 5200 25/02/20 To Cash A/c 350
28/02/20 By Office Fixture A/c 620
29/02/20 By Balance c/f 12230
Total 24350 Total 24350
Van Account
Date Particulars Amt. Date ParticularsAmt. Amt.
01/02/20 To Capital A/c 25000
04/02/20 To Bank A/c 4800
08/02/20 To Nissan Co. A/c 5200
29/02/20 By Balance c/f 35000
Total 35000 Total 35000
Quick Office Ltd Account
Date Particulars Amt. Date Particulars Amt.
05/02/20 By Office Fixture A/c 1100
29/02/20 To Balance c/f 1100
Total 1100 Total 1100
Cash Account
Date Particulars Amt. Date Particulars Amt.
15/02/20 By Office Fixture A/c 70 03/02/20 To Bank A/c 1500
25/02/20 By Bank A/c 350
29/02/20 By Balance c/f 1080
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Total 1500 Total 1500
Nissan Co. Account
Date Particulars Amt. Amt. Date Particulars Amt.
08/02/20 By Van A/c 5200 19/02/20 To Bank A/c 5200
Total 5200 Total 5200
Office Fixture Account
Date Particulars Amt. Date Particulars Amt.
01/02/20 To Capital A/c 800
05/02/20 To Quick Office Ltd A/c 1100
15/02/20 To Cash A/c 70
28/02/20 To Bank A/c 620
29/02/20 By Balance c/f 2590
Total 2590 Total 2590
Loan Account
Date Particulars Amt. Date Particulars Amt.
02/02/20 By Bank A/c 2500
29/02/20 By Balance c/f 2500
Total 2500 Total 2500
Trial Balance
(in the month ending 29/02/2020)
(Amounts in GBP)
Particulars Debit Credit
Capital Account 47300
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Bank Account 12230
Cash Account 1080
Van Account 35000
Quick Office Ltd. Account 1100
Office Fixture Account 2590
Loan Account 2500
Total 50900 50900
PART 4
Income statement for Airman co.:
Income statement in the year end 30th Sept. 2020
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Impact of COVID 19 on company income statement items:
Every business can impacted by its internal and external environment. Internal
environment involves its culture, employees and activities. External environment refers political,
social, technological, economic, environmental and legal factors. As in year 2020 world has
faces COVID 19 that impacts businesses directly. Company Airman co. gain profits from last 10
year but in 2020 it faces various problems due to Lock down. It impacts on its sales and profits of
the company, it faces loss during the year. After march firms sales goes directly break down and
impacts the profitability of the company (Leemans and van der Aalst, 2015). Due to this situation
company has fire many employees because of no work in the company. COVID 19 makes
various financial and operational challenges for the organisations. It impacts business by
reducing cash flows with the manufacturing sector. Due to this, company faces financial
problems because of its less sales and it has to paid fixed charges as it is. Firm has potential
growth in half quarter but after Lockdown March, it has to close its selling, in that time online
selling were not considers also. Various people were staying at there homes without any
compensation that decreases cuistomers demand towards purchasing goods and services that is
the reason for reducing sales (Levin and Light, eds., 2015).
ASSESSMENT 2
PART A
Journal transactions of T- accounts:
JOURNAL ENTRIES
S.NO Date Particulars L.F £ £
2020
1 01/10/20 Cash A/c Dr. 5200
Bank A/c Dr. 8000
Van A/c Dr. 3000
To Capital A/c 16200
(Capital invested into business)
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2 02/10/20 Laptop A/c Dr. 1000
To Bank A/c 1000
( Purchased laptop by cheque)
3 04/10/20 Purchase A/c Dr. 2450
To Toys LTD. A/c 2450
(Goods purchased on Credit basis)
4 05/10/20 Bank A/c Dr. 1500
To Sales A/c 1500
(Goods sold by cheque)
5 12/10/20 Repair A/c Dr. 80
To Cash A/c 80
(Laptop Repair with cash)
6 18/10/20
Toys LTD. A/c
Dr. 100
To Purchase Return A/c 100
(Goods Return)
7 21/10/20 Bank A/c Dr. 500
To rent A/c 500
(Rent received)
8 23/10/20 Fred A/c Dr. 400
Cash A/c Dr. 1500
To Sales A/c 1900
(Goods sold)
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9 23/10/20 Cash A/c Dr. 500
To Sales A/c 500
(Goods sold)
10 24/10/20
Car A/c
Dr. 2500
To Bank A/c 2500
(Car purchased
11 26/10/20 Wages A/c Dr. 820
To Bank A/c 820
(Wages paid)
12 30/10/20 Drawings A/c Dr. 1600
To Bank A/c 1600
(Amount withdraw for personal use)
13 31/10/20 Rent A/c Dr. 1000
To Bank A/c 1000
(Rent Paid)
Total 30150 30150
Balance the accounts and an opening balances:
Ledger
BANK ACCOUNT
Dr.
CR.
Date Particulars J.F £ Date Particulars J.F £
01/10/20 To capital 8000 02/10/20 By laptop 1000
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