BA3UK92O - Business Transactions Recording and Financial Analysis

This project demonstrates the recording of business transactions using T-accounts, balancing these accounts, and extracting a trial balance. It includes the preparation of an income statement and a statement of financial position. The project further calculates and analyzes key financial ratios such as net profit margin, gross profit margin, current ratio, acid test ratio, accounts receivable collection period, and accounts payable payment period. It concludes with a recommendation letter addressing the treatment of specific business expenses, providing a comprehensive overview of financial accounting principles and their practical application.

PROJECT 2
RECORDING BUSINESS TRANSACTIONS
BA3UK92O
March 12, 2021

Table of Contents
March 12, 2021............................................................................................................................................1
b) Balancing the accounts and bringing down an opening balance.........................................................6
c) Extracting the trial balance as at 31stOctober 2020..........................................................................12
d) Preparing the Income Statement for the period ended 31st October 2020:.....................................13
e) Preparing the Statement of Financial Position as at 31st October 2020:...........................................15
f) Linda’s recommendation letter..........................................................................................................16
PART B.......................................................................................................................................................17
I)CalculatingFinancialRatios for Linda’s business as at 31st October 2020............................................17
II) Performance of Financial Ratios for Linda’s business as at31st October 2020..................................19
References.................................................................................................................................................21

PART A
a) Recording the transactions in T- accounts.
CAPITAL A/C
Date Details Amount
GBP
Date Details Amount
GBP
01/10/202
0
Bank 8,000
01/10/202
0
Cash 5,200
01/10/202
0
Vehicles 3,000
Bank A/C
Date Details Amount
GBP
Date Details Amount
GBP
01/10/202
0
Capital 8,000 02/10/20
2
Laptop 1,000
05/10/202
0
Sales 1,500 24/10/20
2
Car 2,500
21/10/202
0
Lease 500 26/10/20
2
Wages 820
30/10/20
2
Rent paid 1,000
31/10/20
2
Drawings 1,600
CASH A/C
Date Details Amount
GBP
Date Details Amount
GBP

01/10/202
0
Capital 5,200 12/10 Laptop 80
23/10/202
0
Auctions 1,500
23/10/202
0
Auctions-
Fred
500
Equipment expenses A/C
Date Details Amount
GBP
Date Details Amount
GBP
01/10/202
0
Vehicles 3,000
02/10/202
0
Laptop 1,000
24/10/202
0
Car 2,500
Purchases A/C
Date Details Amount
GBP
Date Details Amount
GBP
04/10/202
0
Toys 2,450 18/10/20
2
Toys
returns
100
12/10/202
0
Laptop 80
Accounts receivable A/C
Date Details Amount
GBP
Date Details Amount
GBP
23/10/202
0
Fred 400

SALES A/C
Date Details Amount
GBP
Date Details Amount
GBP
05/10/202
0
Sales 1,500
23/10/202
0
Sales 1,900
23/10/202
0
Sales 500
RENT A/C
Date Details Amount
GBP
Date Details AmountGBP
30/10/202
0
Rent 1,000
Accounts Payable A/C
Date Details Amount
GBP
Date Details AmountGBP
18/10/202
0
Toys
returns
100 04/10/20
2
Toys
Ltd
2,450
WAGES A/C
Date Details AmountGBP Date Details AmountGBP
26/10/202
0
Wages 820
DRAWINGS A/C

Date Details AmountGBP Date Details AmountGBP
31/10/202
0
Drawings 1,600
Other Income A/C
Date Details AmountGB
P
Date Details AmountGBP
21/10/202
0
Rent 500
b) Balancing the accounts and bringing down an opening balance
CAPITAL A/C
Date Details AmountGBP Date Details AmountGBP
31/10/202
0
BalanceC/D 16,200 01/10 Bank 8,000
01/10 Cash 5,200
01/10 Van 3,000
16,200 16,200
01/11 Balance
B/D
16,200
BANK A/C
Date Details AmountGBP Date Details AmountGBP
01/10/202
0
Capital 8,000 02/10/20
2
Laptop 1,000
05/10/202
0
Sales 1,500 24/10/20
2
Car 2,500

21/10/202
0
Lease 500 26/10/20
2
Salary 820
30/10/20
2
Lease 1,000
31/10/20
2
Drawings 1,600
31/10/20
2
Balance
C/D
3,080
10,000 10,000
01/11/202
0
Bal
B/D
3,080
CASH A/C
Date Details AmountGB
P
Date Details AmountGBP
01/10/202
0
Capital 5,200 12/10/ Laptop
mend
80
23/10/202
0
Auctions 1,500 31/10 Bal C/D 7,120
23/10/202
0
Auctions-
Fred
500
7,200 7,200
01/11/202
0
BalanceB/D 7,120
Equipment expenses A/C
Date Details AmountGB
P
Date Details AmountGBP
01/10/202 Vehicles 3,000 31/10/ Bal C/D 6,500

0
02/10/202
0
Laptop 1,000
24/10/202
0
Car 2,500
6,500 6,500
01/11/202
0
BalanceB/D 6,500
PURCHASES A/C
Date Details AmountGB
P
Date Details AmountGBP
04/10/202
0
Toys 2,450 18/10/ Toys
return
100
12/10/202
0
Laptop
mend
80 31/10 Bal C/D 2,430
2,530 2,530
01/11/202
0
BalanceB/D 2,430
Accounts Receivable A/C
Date Details Amount
GBP
Date Details Amount
GBP
23/10/202
0
Fred 400 31/10/ Balance
C/D
400
400 400
01/11/202
0
Bal B/D 400

SALES A/C
Date Details Amount
GBP
Date Details Amount
GBP
31/10/202
0
Balance
C/D
3,900 05/10 Sales 1,500
23/10 Sales 1,900
23/10 Sales 500
3,900 3,900
01/11 Balance
B/D
3,900
RENT A/C
Date Details AmountGB
P
Date Details AmountGBP
30/10/202
0
Rent 1,000 31/10/20
2
Balance
C/D
1,000
1,000 1,000
01/11/202
0
Bal B/D 1,000
Accounts Payable A/C
Date Details Amount
GBP
Date Details Amount
GBP
18/10/202
0
Toys
returns
100 04/10/ Toys Ltd 2,450
31/10/202
0
Balance
C/D
2,350
2,450 2,450

01/11 Balance
B/D
2,350
WAGES A/C
Date Details AmountGB
P
Date Details AmountGBP
26/10/202
0
Wages 820 31/10/20
2
Balance
C/D
820
820 820
01/11/202
0
Bal B/D 820
DRAWINGS A/C
Date Details AmountGB
P
Date Details AmountGBP
31/10/202
0
Trip 1,600 31/10/20
2
Balance
C/D
1,600
1,600 1,600
01/11/202
0
Bal B/D 1,600
Other Income A/C
Date Details AmountGBP Date Details AmountGBP
31/10/202 Balance 500 21/10/20 Rent 500

0 C/D 2
500 500
01/11/20
2
Bal B/D 500

c) Extracting the trial balance as at 31stOctober 2020
Linda’s Account Trial Balance as at 31/10/2020:
Date Details Dr GBP Cr GBP
31/10/2020 Capital 16,200
31/10/2020 Bank 3,080
31/10/2020 Cash 7,120
31/10/2020 Purchase return 100
31/10/2020 Purchases 2450
31/10/2020 Acc. receivable 400
31/10/2020 Sales 3,900
31/10/2020 Rent paid 1,000
31/10/2020 Acc. payable 2,350
31/10/2020 Wages 820
31/10/2020 Drawings 1,600
31/10/2020 Rent received 500
31/10/20 Van a/c 3000
31/10/20 Laptop a/c 1000
31/10/20 Repairing a/c 80
31/10/20 Car a/c 2500
TOTAL 23050 23050