Detailed Analysis of Business Financial Transactions and Reporting

This report meticulously examines the process of recording and analyzing business financial transactions. It begins with an introduction to financial transactions and their importance, followed by a detailed explanation of the double-entry system. The main body of the report includes the preparation of T-accounts, balancing accounts, and taking down opening balances. It also covers the creation of a trial balance, income statement, and statement of financial position. Furthermore, the report analyzes the financial performance of a business using ratio calculations, including net profit, gross profit, current, and quick ratios, as well as accounts receivable and payable collection periods. The report concludes with an analysis of the business's performance compared to industry standards, offering insights into areas for improvement. References to relevant literature are also provided.

Recording Business
Transaction

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Part A...........................................................................................................................................3
Part B.........................................................................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
In a business a range of transactions are done on a daily basis under which both financial and non
financial activities are included. This is essential for companies to record the financial
transactions in a systematic manner so that financial statements can be produced effectively and
correctively (Tillman, 2017). The report is based on different kinds of financial transactions on
which various types of financial reports are produced like income statements, balance sheet and
many more. Apart from this, such produced statements are used to compute ratios in order to
assess financial performance of given business.
MAIN BODY
Part A
(a) Preparation of double entry in T-accounts.
Double entry system can be understood as a form of fundamental concept which is used to record
day to day business transactions in the accounting books of a business (Harkiolakis and Halkias,
2016). These prepared journal entries are used for further basis like preparation of trial balance,
ledger accounts and many more. Below preparation of double entries is done in such manner:
Date Particulars
L.
F Debit Amount Credit Amount
2020
01/10/20 …...Bank A/c Dr…... 8000
…...Cash A/c Dr…... 5200
…...Van A/c Dr…... 3000
…...To Capital A/c 16200
(Being business started)

02/10/20 …...Laptop A/c Dr…... 1000
…...To Bank A/c 1000
(Being laptop purchased)
04/10/20 …...Purchase A/c Dr…... 2450
…...To Toy Ltd 2450
(Being purchase made)
05/10/20 …...Bank A/c Dr…... 1500
…...To Sales A/c 1500
(Being sales made)
12/10/20 …...Repairs A/c Dr…... 80
…...To Cash A/c 80
(Being cash paid for repairs)
18/10/20 …...Toy Ltd A/c Dr…... 100
…...To Purchase Return A/c 100
(Being purchase return made)
21/10/20 …...Bank A/c Dr…... 500
…...To Rent A/c 500
(Being rent received)

23/10/20 …...Cash A/c Dr…... 1500
…...Fred A/c Dr…... 400
To Sales A/c 1900
(Being sales made)
23/10/20 …...Cash A/c Dr…... 500
…...To Sales A/c 500
(Being sales made)
24/10/20 …...Car A/c Dr…... 2500
…...To Bank A/c 2500
(Being car purchased)
26/10/20 …...Wages A/c Dr…... 820
…...To Bank A/c 820
(Being wages paid)
30/10/20 …...Rent A/c…... Dr…... 1000
…...To Bank A/c…... 1000
(Being rent paid)
31/10/20 …...Drawings A/c Dr…... 1600
…...To Bank A/c 1600
(Being drawings made)

(b) Balancing of accounts and take down an opening balance.
Ledger account can be defined as form activity which is used to maintain financial data in an
effective manner (Hladika, Mokošová and Molín, 2017). This is used to manage the debit and
credit balance of each account or activity in an effective manner so that closing balance can be
used to prepare the trial balance. Below some ledger accounts are prepared in such manner:
Bank account
Date Particular J.F Amount Date Particular J.F Amount
…...To
capital…... …...8000
…...To sales…... …...1500 …....By laptop …...1000
…...To rent
received…... …...500 …...By Car …...2500
…...By wages …...820
…...By Rent …...1000
…...By drawing …...1600
….By balance c/d …...3080
Total …...10000 Total …...10000
Rent received account
Date Particular J.F Amount Date Particular J.F Amount
…...By bank 500
500 500
Cash account
Date Particular J.F Amount Date Particular J.F Amount
…...To capital 5200 …...By repair 80
…...To sales 1500 …...By balance 7120

c/d...
To sales 500
7200 7200
Fred a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To sales 400
…...By balance
b/d... 400
Repair a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To
cash... 80
…...By balance
b/d... 80
Purchase a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To Toys
limited 2450
…...By balance
c/d 2450
Rent a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To Bank 1000
…...By
balance b/d 1000
Van a/c
Date Particular J.F Amount Date Particular J.F Amount

…...To
capital 3000
…...By
balance b/d... 3000
Capital a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To balance
b/d... 16200 …...By bank 8000
…...By cash 5200
…...By van 3000
Sales a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To balance
b/d... 3900 …...By bank 1500
…...By cash 1500
…...By Fred 400
…...By cash 500
Laptop a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To bank 1000
…...By balance
b/d 1000
Car a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To 2500 …...By balance 2500

Bank b/d
Wages a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To
Bank 820
…...By balance
b/d 820
Drawing a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To
Bank 1600
…...By balance
b/d 1600
Toys limited a/c
Date Particular J.F Amount Date Particular J.F Amount
…...To purchase
return 100 …......By purchase 2450
…...To balance
b/d 2350
2450 2450
(c) Preparation of trial balance.
The trial balance can be defined as a form of financial statement which is used to list all the
ledger balances including income and expenses (Rahwani, 2017). Under this statement, heading
of each individual ledger is included so that complexity can be reduced. Below a trial balance is
produced in accordance of given data set which is as follows:
Accounts Debit Credit
...Bank... 3080

...Cash... 7120
...Van... 3000
...Laptop... 1000
...Toys limited... 2350
...Purchase... 2450
...Purchase return... 100
...Sales... 3900
...Rent received... 500
...Rent paid... 1000
...Wages... 820
...Drawing... 1600
...Capital... 16200
...Repairing
account... 80
...Fred account... 400
...Car account... 2500
22550 22550
(d) Preparation of income statement.
The term income statement may be known as a type of statement that is applied to analyse
financial health of a company during a financial year (Corcoran, 2016). There are different kinds
of methods and approaches which are used to prepare income statements. Below an income
statement is prepared in such manner:

(e) Preparation of statement of financial position.

(f) Explaining Linda about which drawings are concerning small business entities.
The term drawings can be understood as an expenses which is done by business owner for
his/her personal purpose using funds of business (North, International Business Machines Corp,
2016). In the context of above business of Linda, there is an expense of 1600 pounds which is
done for travelling and it should be considered as drawings. This is so because expenses is done
for personal purpose which is to reduce stress by travelling in Florida.
Part B
Ratio calculations