Financial Accounting: Recording Business Transactions and Analysis

This report delves into the crucial process of recording business transactions, beginning with an introduction to double-entry bookkeeping. The assessment covers various aspects of financial accounting, including the need for accounting information for decision-makers, exploring the advantages and disadvantages of different business structures for recording financial data. The report provides detailed journal entries for setting up a new business, along with ledger accounts and trial balance preparation. Furthermore, it presents an income statement analysis for a specific company, Airman Co., and examines the impact of the COVID-19 pandemic on the company's financial statements. The report concludes by summarizing the key takeaways and providing references to relevant sources. It showcases the practical application of accounting principles in real-world business scenarios, emphasizing the importance of accurate financial reporting and analysis for informed decision-making.

Recording Business
Transactions

Table of Contents
INTRODUCTION...........................................................................................................................1
ASSESSMENT 1.............................................................................................................................1
PART 1............................................................................................................................................1
Need of the accounting information for the decision makers......................................................1
Advantages and disadvantages of the business structure for recording the accounting
information...................................................................................................................................2
PART 2............................................................................................................................................3
Journal entries for the David wise for setting up new business ..................................................3
PART 3............................................................................................................................................4
Prepare of the ledger accounts and trial balance for the Pearce & sons......................................4
PART 4............................................................................................................................................6
Income statement for Airman co.:...............................................................................................6
Impact of Covid-19 on the company financial statements...........................................................7
CONCLUSION................................................................................................................................7
REFERENCES ...............................................................................................................................8

INTRODUCTION
Recording business transaction is the double entry process in which all the steps are
included from recording to evaluation. It helps the business in in recording the transaction in the
debit and credit side which is done in the journal. In the financial statements there is the
summary of all the transactions which is recorded in the profit and loss. It means the economic
event that is recorded in the accounting system of the organization. All these transaction
measurable in the money (Aragon, 2017) . In this assessment, business transaction is recorded in
the form of journal,ledger and balance sheet which is based on the companies business records to
know about its financial growth and position. In this there is the need of the accounting
information for the decision makers and also the advantage and disadvantage of the business
structure.
ASSESSMENT 1
PART 1
Need of the accounting information for the decision makers
Accounting information play a important role in for the continuous running of the
business because it helps in tracking the income and expenditure, provide important information
to the investor and also financial information to the government. Financial accounting helps in to
keep track of all business transactions in the book of accounts. It involves recording,
summarizing, reporting of all economic activity from the business functioning over a specific
period of time (Kim, Rhee and Lee, 2016). There are many standards and policies are made for
the company in the UK which is follow by the generally accepted accounting principle. Financial
accounting helps the decision maker in making decisions in following ways.
 Through this information investor can easily do the analysis of the company financial
statement and also comparison between the financial health of the trade securities.
 It also help creditors in finding out the liquidity, solvency and and efficiency of the
business ate the particular time period.
 It also helps to the manager in effective use of the resources for taking the business
decisions effectively.
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 It also help the management in recording the financial transaction for the good position of
the company such as Profit and loss, balance sheet and ratio analysis.
 It helps the decision maker in making the planning in regards to the sales, development
and also help in determining the inventory in the stock.
 Accounting information also help in making budget because it is very necessary for
making the estimation of revenue and expenses at the workplace.
 It also help the internal user in making investment credit and other decisions for the
employees, investors and creditors.
 It also help the finance manager in take decisions for controlling the operating activities
and financing activities (Klenk, Onyenokwe and Perez, 2020).
Advantages and disadvantages of the business structure for recording the accounting information
Accounting: It is a process of recording or financing the transaction for the pertinent of
the business. It includes summarize, and reporting the transaction for the accurate decision. Some
examples of the accounting are planning of income tax, financial planning, auditing.
Advantages
 Maintenance of business records: It helps in recording all the transaction related to the
finance in a systematic manner in books. Every transaction related to the finance is not
easy to remember due to the size and complexities of the organisation.
 Preparation of financial accounts: In financial statement all the accounts Balance
Sheet, P&L are prepared in a proper manner. The transaction related to the finance are
also recorded correctly so that the results are accurate enough.
 Comparison of results: It helps in comparing the results of two years so that the accurate
data can be analysed. It helps in recording the transaction according to the policies.
 Decision making: proper recording of the data make it easier for the management to take
the decisions in a proper manner and helps the management to plan its future activities of
the various department and prepare budgets.
Disadvantages:
 Express accounting information in terms of money : transaction that are non-financial
are not recorded and do not have any effect in the books of accounts. Transactions related
to the finance are measurable in a proper manner because they are recorded in monetary
value.
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 Information based on estimates: The data maintained in books of accounts are
recorded on the basis of the estimates but sometimes the data recorded are also inaccurate
that makes the wrong decision (Peters, D 2016).
 Biased information: It helps in influencing the entity of accounting information. For
measure of entity different accounting methods are adopted like inventory valuation,
depreciation, treatment of capital and the revenue expenses.
 Recording of the fixed assets at the original cost: In accounting there is a difference
between the fixed cost and the current cost of the fixed asset due to change in time and
technology.
PART 2
Journal entries for the David wise for setting up new business
Journal entry means recording of the transactions in the double entry form because
through this entry all transaction are posted in the ledger. In this business transaction is recorded
in debit and credit side. All business transaction is recorded in double entry form which is given
below.
Journal Entries
S. NO Date Particulars L.F £(Debit) £(Credit)
1 01/02/20 Purchase Return A/C Dr. 350
To Purchase A/c 350
( Being purchase return made to
supplier
2 04/02/20 Bad Debts A/c Dr. 85
To S. keys A/c 85
(Being bad debt is written off)
3 09/02/20 Machinery A/c DR. 2,300
To Bank 200
To TS CO. 2,100
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( Being machinery purchase in
the cash and cheque)
4 13/02/20 Cash account DR. 220
Bad debts A/c DR. 50
To S. hill Ltd...... 270
(Being money owed by S. hill
270 and paid only 220, Rs. 50
declare as bad debts)
5 20/02/20 Drawing A/s Dr. 180
To Stock A/C.... 180
( Being stock use personal use)
6 26/02/20 Insurance A/c Dr. 85
To Cash A/c.......... 85
( Being Business money paid
for private house insurance)
7 28/02/20 Machinery A/c DR. 1,050
To Bank A/c........ 1,050
( Being amount paid by TS CO.
for half amount credit on
machinery)
Total 4320 4,320
PART 3
Prepare of the ledger accounts and trial balance for the Pearce & sons
Ledger accounts- It is the record of the transaction in various accounts according to the
entries which is posted in the journal entries, through this company maintains the data of all
transactions in the individual accounts.
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Ledger Accounts
(Amounts in GBP)
Capital Account
Date Particulars Amt. Date Particulars Amt.
Feb '1 By Bank A/c 21500
Feb '1 By Van A/c 25000
Feb '1 By Office Fixture A/c 800
Feb'29 To Balance c/f 47,300
Total 47300 Total 47,300
Van Account
Date Particulars Amt. Date ParticularsAmt. Amt.
feb'01 To Capital A/c 25,000
feb'04 To Bank A/c 4,800
feb'08 To Nissan Co. A/c 5,200
feb'29 By Balance c/f 35000
Total 35000 Total 35,000
Bank Account
Date Particulars Amt. Date Particulars Amt.
feb'03 By Cash A/c 1500 feb'01 To Capital A/c 21,500
feb'04 By Van A/c 4800 feb'02 To Loan A/c 2,500
feb'19 By Nissan Co. A/c 5200 feb'25 To Cash A/c 350
feb'28 By Office Fixture A/c 620
Feb' 29 By Balance c/f 12230
Total 24350 Total 24,350
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Cash Account
Date Particulars Amt. Date Particulars Amt.
feb'15 By Office Fixture A/c 70 feb'03 To Bank A/c 1500
feb'25 By Bank A/c 350
feb'29 By Balance c/f 1080
Total 1500 Total 1500
Quick Office Ltd Account
Date Particulars Amt. Date Particulars Amt.
feb'05 By Office Fixture A/c 1100
feb'29 To Balance c/f 1,100
Total 1100 Total 1,100
Office Fixture Account
Date Particulars Amt. Date Particulars Amt.
feb'01 To Capital A/c 800
feb'05 To Quick Office Ltd A/c 1,100
feb'15 To Cash A/c 70
feb'28 To Bank A/c 620
feb'29 By Balance c/f 2590
Total 2590 Total 2,590
Nissan Co. Account
Date Particulars Amt. Amt. Date Particulars Amt.
feb'08 By Van A/c 5200 feb'19 To Bank A/c 5,200
Total 5200 Total 5,200
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Loan Account
Date Particulars Amt. Date Particulars Amt.
feb'02 By Bank A/c 2500
feb'29 By Balance c/f 2,500
Total 2500 Total 2,500
Trial balance- It is the list of all ledger which is expressed in both capital and revenue,
this contain the amount of all ledger account which is balanced on the debit side and credit side
because each nominal account in the ledger should have debit or credit balance.
Trial Balance
(in the month ending 29/02/2020)
(Amounts in GBP)
Particulars Debit Credit
Capital Account 47,300
Bank Account 12,230
Cash Account 1,080
Van Account 35,000
Quick Office Ltd. Account 1,100
Office Fixture Account 2,590
Loan Account 2,500
Total 50,900 50,900
PART 4
Income statement for Airman co.:
Income statement in the year end 30th Sept. 2020
Profit & Loss Account
(In the year ending 30th Sept 20)
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Particulars Amount Particulars Amount
Opening Stock 36,000 Sales 80000
Purchases 150000 Less: Returns Inwards -2000 78,000
Less: Returns Outwards -600 1,49,400 Closing Stock 1,20,000
Carriage Inwards 720
Gross Profit c/f 11,880
Total 1,98,000 Total 1,98,000
Carriage Outwards 400 Gross Profit c/d 11,880
Motor Expenses 1,200 Net (loss) 29,070
Rent 5,000
Telephone Charges 620
Wages and Salaries 32,000
Insurance 830
Office Expenses 600
Sundry Expenses 300
Total 40,950 Total 40950
Impact of Covid-19 on the company financial statements
In the Airman company, financial statements of the company is affected by the Corona
virus because in the COVID- 19 every where is the lock down because it is very harmful for the
body, due to this economy of the country is down and GDP of the UK is also decline which give
many impact to all industries. Business structure is affect by both internal and external factors
because internal factor means employee, owner, manager and management of the company and
external parties are shareholder, creditor and investors. From the last 10 years company earning
profit but due to this company is getting loss in their business, they are not able to give salary to
their employees. They face many financial problems like decrease in sales and there is no growth
and expansion of the firm which result is decrease in the purchasing power of internal partiesa
and external parties (Viriyasitavat, Da Xu, Bi and Pungpapong, 2019).
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CONCLUSION
From the above report it has been concluded that recording business transaction is very
useful in maintaining the dual entry book keeping by making the profit and loss account,
balance sheet. It also help in making the business structure of the company and analysis of all
elements of income statements
REFERENCES
Books and Journals
Aragon, N., 2017. Calculating Artists' Royalties: An Analysis of the Courts' Dualistic
Interpretations of Recording Contracts Negotiated in a Pre-Digital Age.Cardozo L. Rev.
De-Novo, p.180.
Kim, H., Rhee, C. E. and Lee, H .J., 2016. A low-power video recording system with multiple
operation modes for H. 264 and light-weight compression.IEEE Transactions on
Multimedia. 18(4). pp.603-613.
Klenk, A .D., Onyenokwe, C. M. and Perez, E. A., 2020. Recording Human Stories in a Time of
Crisis.
Peters, J. D., 2016. Recording beyond the grave: Joseph Smith’s celestial bookkeeping.Critical
Inquiry.42(4). pp.842-864.
Viriyasitavat, W., Da Xu, L., Bi, Z. and Pungpapong, V., 2019. Blockchain and internet of things
for modern business process in digital economy—the state of the artIEEE Transactions
on Computational Social Systems.6(6). pp.1420-1432.
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