Comprehensive Report on Recording Business Transactions & Financials

This report provides a detailed analysis of recording business transactions for Anne York's furniture business. Part A covers the journal entries, ledger accounts, trial balance, income statement, and balance sheet preparation. It also explains the concept of drawings in accounting. Part B focuses on calculating and interpreting key accounting ratios such as net profit margin, gross profit margin, current ratio, and acid-test ratio to evaluate the financial health of the business. Furthermore, it discusses the impact of the global pandemic on the business, highlighting challenges such as decreased profits and operational disruptions. The report concludes by emphasizing the importance of analyzing financial books for informed decision-making and implementing remedial measures.

Recording Business
Transactions
Assessment 2

Table of Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
a) Record the enterprise proceedings in the journal...............................................................1
b) Prepare general ledgers......................................................................................................3
c) Formulate the Trial Balance...............................................................................................6
d) Construct the Income Statement........................................................................................7
e) Provide details of the Balance Sheet..................................................................................7
f) Explain the drawings in the case of Anne to Linda ...........................................................8
PART 2 ...........................................................................................................................................9
a) Determine the Accounting Ratios of the Business.............................................................9
b.)Impact of global pandemic on the business.......................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES .............................................................................................................................11

INTRODUCTION
Business transactions are those events which are monetary or quantitative in nature.
Recording of transactions are necessary for knowing the true and fair view of an organisation
which helps to take decisions by top level managers(Al-Jaroodi and Mohamed 2019). These
transactions acknowledge about the liquidity, profitability and cash flows of the business. This
report contains two parts. In part one recording journal entries in books of Anne york, a sole
trader who carries the business of furniture. Preparing ledgers accounts, trial balance, income
statement, balance sheet and drawings are explained in first task(Arun, Cuomo and Gaur, 2019).
Ratios of the same business is interpreted from the above financial statements and impact of
global pandemic is discussed in part B of the respective report.
PART A
a) Record the enterprise proceedings in the journal
JOURNAL ENTRIES
Date Particulars Debit Credit
01/10/21 Bank
Cash
Flat
Car
Capital
(Business being started with cash, flat and a car)
10000
4800
45000
12000
71800
02/10/21 Purchases
Home Ltd
(goods of the firm i.e., furniture purchased on credit
from Home Ltd.)
5400
5400
04/10/21 Computer
Printer
Bank
(Computer and printer being bought for cash)
800
200
1000
1

05/10/21 Bank
Sales
(Goods worth 2800 being sold)
2800
2800
12/10/21 Repair Expense
Cash
(repair expenses incurred for repairs done in printer)
110
110
18/10/21 Home Ltd.
Purchases
(Furniture of wroth 250 being returned to home Ltd.)
250
250
21/10/21 Bank
Rent Income
(Rent received by the organisation)
800
800
23/10/21 Rayan
Cash
Sales
(sold goods to Rayan worth 2100, out of which, 1800
have been received by the business)
300
1800
2100
23/10/21 Cash
Sales
(sold goods to David for cash)
700 700
24/10/21 Laptop
Bank
(A new laptop has been bought for official use)
1700
1700
26/10/21 Wages
Bank
(shopkeeper has been paid monthly wages)
820
820
30/10/21 Rent Expenses
Bank
850
850
2

(a place being rented by the business and paid expenses
for same)
31/10/21 Drawings
Bank
(Money being paid by the business for a personal
expense of the owner)
1200
1200
31/10/21 Cash
Rayan
(Rayan, the debtor of the business paid for the debt)
150
150
b) Prepare general ledgers
Bank Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 10000 04/10/21 Computer 800
21/10/21 Rent 800 04/10/21 Printer 200
05/10/21 Sales 2800 24/10/21 Laptop 1700
26/10/21 Wages 820
30/10/21 Rent 850
31/10/21 Drawings 1200
31/10/21 Balance c/d 8030
13600 13600
01/11/21 Balance b/d 8030
Cash Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 4800 12/10/21 Repair 110
3

23/10/21 Sales 1800
23/10/21 Sales 700
31/10/21 Rayan 150 31/10/21 Balance c/d 7340
7450 7450
01/11/21 Balance b/d 7340
Flat Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 45000 31/10/21 Balance c/d 45000
45000 45000
01/11/21 Balance b/d 45000
Car Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Capital 12000 31/10/21 Balance c/d 12000
12000 12000
01/11/21 Balance b/d 12000
Capital Account
Date Particulars Ref Amount Date Particulars Ref Amount
01/10/21 Bank 10000
01/10/21 Cash 4800
01/10/21 Flat 45000
31/10/21 Balance c/d 71800 01/10/21 Car 12000
71800 71800
4

01/11/21 Balance b/d 71800
Purchases Account
Date Particulars Ref Amount Date Particulars Ref Amount
18/10/21 Home Ltd 5400 02/10/21 Home Ltd 250
31/10/21 Balance c/d 5150
5400 5400
01/11/21 Balance b/d 5150
Home Ltd Account
Date Particulars Ref Amount Date Particulars Ref Amount
02/10/21 Purchases 250 18/10/21 Purchases 5400
31/10/21 Balance c/d 5150
5400 5400
01/11/21 Balance b/d 5150
Computer Account
Date Particulars Ref Amount Date Particulars Ref Amount
04/10/21 Bank 800 31/10/21 Balance c/d 800
800 800
01/11/21 Balance b/d 800
Printer Account
Date Particulars Ref Amount Date Particulars Ref Amount
04/10/21 Bank 200 31/10/21 Balance c/d 200
200 200
5

01/11/21 Balance b/d 200
Repair Expenses Account
Date Particulars Ref Amount Date Particulars Ref Amount
12/10/21 Cash 110 31/10/21 Balance c/d 110
110 110
01/11/21 Balance b/d 110
Rent Account
Date Particulars Ref Amount Date Particulars Ref Amount
21/10/21 Bank 850 30/10/21 Bank 800
31/10/21 Balance c/d 50
850 850
01/11/21 Balance b/d 50
Rayan Account
Date Particulars Ref Amount Date Particulars Ref Amount
23/10/21 Sales 300 31/10/21 Cash 150
31/10/21 Balance c/d 150
300 300
01/11/21 Balance b/d 150
Sales Account
Date Particulars Ref Amount Date Particulars Ref Amount
05/10/21 Bank 2800
23/10/21 Rayan 300
6

31/10/21 Balance C/d 5600 23/10/21 Cash 1800
23/10/21 Cash 700
5600 5600
01/11/21 Balance b/d 5600
Laptop Account
Date Particulars Ref Amount Date Particulars Ref Amount
24/10/21 Bank 1700 31/10/21 Balance c/d 1700
1700 1700
01/11/21 Balance b/d 1700
Wages Account
Date Particulars Ref Amount Date Particulars Ref Amount
26/10/21 Bank 820 31/10/21 Balance c/d 820
820 820
01/11/21 Balance b/d 820
Drawings Account
Date Particulars Ref Amount Date Particulars Ref Amount
31/10/21 Bank 1200 31/10/21 Balance c/d 1200
1200 1200
01/11/21 Balance b/d 1200
c) Formulate the Trial Balance
Particulars Debit Credit
Bank 8030
7

Cash 7340
Flat 45000
Car 12000
Capital 71800
Purchases 5150
Home Ltd 5150
Computer 800
Printer 200
Repair Expenses 110
Rent 50
Rayan 150
Laptop 1700
Wages 820
Drawings 1200
Sales 5600
TOTALS 82550 82550
d) Construct the Income Statement
INCOME STATEMENT
Particulars Amount (£) Amount (£)
Net Sales 5600
Less: Cost of Goods Sold 4830
Purchases 5150
Add: Closing Stock 320
8

Gross Profit 770
Less: Operating Expenses 980
Repair Expenses 110
Rent 50
Wages 820
Net Loss -210
e) Provide details of the Balance Sheet
BALANCE SHEET
Particulars Amount (£ )
ASSETS
Current Assets:
Stock 320
Bank 8030
Cash 7340
Debtor (Rayan) 150
Total Current Assets 15840
Fixed Assets:
Flat 45000
Car 12000
Computer 800
Printer 200
Laptop 1700
Total Fixed Assets 59700
Total ASSETS 75540
9

EQUITY AND LIABILITIES:
Liabilities:
Current Liabilities:
Creditors (Home Ltd.) 5150
Total Current Liabilities 5150
Equity:
Capital 71800
Less: Drawings 1200
Net Loss -210
Total Equity 70390
Total Liabilities 75540
f) Explain the drawings in the case of Anne to Linda
Drawing refers to the amount which is withdrawn from an organisation for its individual
or personal use (Doyon, 2018). Interest on drawings are also paid by the person who withdraw
the money from their respective businesses. Anne spend some portion of money to book hotels
and flights for her holiday which is personal nature expense.
PART 2
a) Determine the Accounting Ratios of the Business
 Net Profit Margin = ( Net profit / Net Sales ) * 100 = ( - 210 / 5600 ) * 100 = - 3.75 %
 Gross Profit Margin = ( Gross Profit / Net Sales) * 100 = ( 770 / 5600 ) * 100 = 13.75
%
 Current Ratio = Current Assets / Current Liabilities = 15480 / 5150 = 3.01
10