Financial Accounting: Recording Business Transactions and Impact

This report provides a comprehensive analysis of recording business transactions. It begins with an introduction to business transactions and their importance, followed by an examination of the decision-makers who utilize accounting information and the advantages and disadvantages of recording such information. The report then delves into practical applications, including journal entries for specific transactions, the creation of a ledger and trial balance, and the preparation of an income statement. Furthermore, it explores the impact of COVID-19 on various income statement items, providing insights into the pandemic's financial effects. The report concludes with a summary of the key findings and a list of references.

RECORDING
BUSINESS
TRANSACTION

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............................................................................................................................................4
Journal entries with narration for the David wises:.....................................................................4
PART 3............................................................................................................................................5
Ledger and trail balance of Pearce & sons:................................................................................5
PART 4............................................................................................................................................6
Income statement for Airman co.:...............................................................................................6
Impact of COVID 19 on company income statement items:.......................................................7
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
A business transaction refers to the transaction in which the transaction of goods, services
occur between two or more people or the parties sharing the common view. It must be
measurable and recorded in term of money in the accounting system. They are conducting the
transaction for there mutual benefits for example there is a transaction between the customer and
shopkeeper (Chow and Schoenbaum, 2020). These transactions affects the overall position like
its assets, liabilities, incomes, expenditure. It affects the financial position of the organisation and
find out the profit and loss the company is getting affected. There are the different types of the
business transactions cash and credit transactions, internal and the external transactions takes
place in the organisation. This report consider various transactions of the business. They covers
the topic like journal, trial balance, ledger and the ratios to find the efficiency of the business and
to analysis the competitors competition.
ASSESSMENT 1
PART 1
Decision makers and their need for accounting information:
Chief finance officer helps to take the decision in the company and is responsible for the
financial actions so the decisions are to be taken in the proper manner and will not affect the
organisation. The duties of the CFO is to have the proper tracking on the cash flows and helps in
finding the strength and weakness of the company. Strategic managers helps in taking the
decisions as they are the top management in the organisation and they have to take the decisions
and should communicate the direction to the team members so that they can perform better and
can achieve the task. Finance manager helps in taking the decisions regarding the assets of the
company and managing them properly in an organisation. It helps in analysing the internal and
the external variables that affect the organisation and take the decision in an proper manner.
Financial accounting is a process of three elements in which the recording, summarizing and the
reporting in the organisation takes place in an easy way. The financial statements helps in finding
the income statement, balance sheet and the profit and loss account. It helps in following the cash
basis accounting and help in doing the transactions in the accounting. Revenue includes the
receipt and the payment of the organisation. It helps in tracking the activities in the organisation
so that the decision can be take and help in forecasting. It helps in identifying and regulating the

day to day activities of the organisation by which future benefits can be generated and help in
identifying the growth in the business. It helps in knowing the resources in the organisation
which are beneficial and help in identifying its growth so that the opportunities will be
accomplished in the organisation. It helps in identifying the resources which are profitable to the
organisation so that the proper evaluation can be done in an easy manner (Tillman, 2017). There
are the internal and the external managers in the organisation which help in taking the decision in
the organisation regarding the sales, marketing, promotional activities, hiring compensation
which help in taking the decision in an easy way. Investors used the information which is worth
for the organisation to set the prices and the share prices in the organisation. It is used by the
various people in various ways which help in setting the common standard in the organisation
known as the accounting standard and the generally accepted accounting principles (GAAP)
(Warren, Jonick and Schneider, 2020). It helps in analysing the past data in the organisation and
help in finding the reasons of the changes in the organisation so that the organisation is not
affected in the future and helps in taking the decision regarding the activities in the organisation
for getting the good results in future.
Advantage and Disadvantage of recording accounting information:
Advantages of recording accounting information:
 The records should be kept in the proper manner so the tax will be easily saved which
helps in proper record of the transaction so that the owners are able to proof themselves
and the various expenses that incurred in the business to carry out day to day operations
of the business.
 The accounting records helps in backing up all the expense and the incomes that incurred
in the business at the time of the audit (Gordon, 2015). Without the proper recording of
the goods the auditors takes the decision which suited them the best.
 The accounting system shortens the time of the audit task which has to be completed. If
the accounts are maintained in a proper manner they are required to fill the form of the
income tax return . Once the accounts are verified in a proper manner the auditors find he
accuracy and help in taking the decision easily and spend the less time in the business.

 Good recording system should maintain the record in a proper manner and should follow
the law so that the decision can be taken on the easy basis and should follow the proper
laws of the business.
 Proper recording of the goods help in knowing the proper financial position of the
company so that the expansion and the improvements can take place in the organisation.
It helps in taking the proper strategic decisions in the organisations so that the results can
be derived.
 Proper accounting information helps in avoiding the penalties and the interest of the
people as if the records are maintained in the proper manner penalties may be avoided in
the proper manner so that the decisions can be maintained in easy way.
 Proper recording of the accounts are act as the legal evidence as the proof of the money
matters which help the business if any issue arises in the future the documents will help
the business to save and can run for the long term and can generate the revenue.
Disadvantages of recording accounting information:
 The non-financial transactions are not recorded in the books of accounts only the
transactions which are easily measurable can be recorded in an proper manner by which
the efficiency cannot be measured easily in the organisation.
 The accounting information in the organisation is based on the estimates which may
sometime have the negative impact in the organisation and the estimates sometimes gives
the negative results which affect the organisation (Hanifatunnisa and Rahardjo, 2017).
 Some the accounting information provided may have a biased it affects the information
provided by the business, there are the different measures used for the measurement of
the entity in the organisation.
 Sometimes the fixed records are recorded at the original costs due to the change in time
and technology which not show the true entity of the organisation and affect the business
very easily.
 The proper records of the accounts manipulate the accounts which affects the business
and the profits are misrepresented as they are not distributed properly in the organisation
and the results will be achieved in the proper manner.

 Stability in the money is not possible in the organisation for identifying the true position
true price should be considered otherwise the accurate results cannot be derived easily in
the organisation and would affect the business.
 Loss of information is the issue which was faced by the people during the recording of
the accounting information as the information is leaked and cannot be used by the
organisation and sometimes the documents are not found on time which waste the time so
the recording can be done in the proper manner.
 Human error is the biggest disadvantage of recording the accounting information as the
wrong entries is done by the people which sometimes may not be found out easily and
sometime affects the business if the transactions are not recorded in an proper manner in
the organisation.
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
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

Trial Balance
(in the month ending 29/02/2020)
(Amounts in GBP)

Particulars Debit Credit
Capital Account 47300
cashAccount 1080
bank Account 12230
Van Account 35000
Loan Account 2500
Office Fixture Account 2590
Quick Office Ltd. Account 1100
Total 50900 50900
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)
Particulars Amount Particulars Amount
Opening Stock 36,000 Sales 80000
Purchases 150000 Less: Returns Inwards -2000 78000
Less: Returns Outwards -600 149400 Closing Stock 120000
Carriage Inwards 720
Gross Profit c/f 11880
Total 198000 Total 198000
Carriage Outwards 400 Gross Profit c/d 11880
Motor Expenses 1200
Rent 5000
Wages and Salaries 32000

Office Expenses 600
Sundry Expenses 300
Insurance 830
Telephone Charges 620
Net profit / (loss) -29070
Total 11880 Total 11880
Impact of COVID 19 on company income statement items:
COVID- 19 has the impact on the business which affect the internal and the external
environment of the business which affect the environment and involves different activities like
culture, employees and the activities which affect the organisation (Menna, Agrafiotis and
Georgopoulos, 2018). There are the different external activities like the social, technological,
economical which affects the business as the people stop purchasing the goods from the market
which affects the earning of the people. Some of the companies which are generating the profits
from many years now the company in the year 2020 suffers from the loss as the people stop
doing the transaction and affects the business and the organisation. The COVID has the impact
on the sales of the business as there are low sales an the revenue is also not generated by the
company as it affects the business. Sales are reduced after the march and the people got fired
from there jobs because of the no work in the company. Various operational and the financial
changes are faced by the organisation during the COVID 19 which affects the economy of the
nation and the individual also as they do not have money. In the manufacturing sector the cash
flow of the money is stopped as the person start saving the money or they do not have the money
to do the expenditure in the organisation. The fixed prices are charged from the customers
because the sales of the companies is decreased by which the customers has to pay the fixed
price. Offices reduced the salary of the staffs as the income is not generated as there is no cash
flowing in the market and the people start using there savings. The demand of the customers are
also decreased as they do not have the ability to pay for the goods which are not necessary these
are the reasons by which there is decrease in the sales and which affect the companies financial
position also as compared to the revenue generated in the last year.

CONCLUSION
From the above report it has been concluded that the business accounting is the process
reporting, summarizing and recording in an easy manner so that the transaction can be take place
in the future so that the results can easily be derived. There are the different types of the financial
accounting which help in making the decision in the company so that the results can be
optimized in an easy way. It helps in measuring the transaction in an easy manner and sometimes
the financial position of the company is also affected. Some advantages and disadvantages of the
organisation is studied which help in providing the sufficient information and recording the
transactions which help in preparing the financial accounts. The reports considers the Journal,
Ledger, Trial balance, trading and income statement in the organisation. Some of the factors are
also studied like internal and external which affects the sales and the profits of the organisation.
The income statement is prepared due to the impact of the COVID- 19 as its affects the many
organisation and reduces the efficiency to find its overall growth the accounts are prepared in an
proper manner.

REFERENCES
Books and Journals:
Chow, D. C. and Schoenbaum, T. J., 2020. International business transactions: problems, cases,
and materials. Wolters Kluwer Law & Business.
Gordon, S., 2015. The Future of the Music Business: How to Succeed with New Digital
Technologies Fourth Edition. Hal Leonard Corporation.
Hanifatunnisa, R. and Rahardjo, B., 2017, October. Blockchain based e-voting recording system
design. In 2017 11th International Conference on Telecommunication Systems Services
and Applications (TSSA) (pp. 1-6). IEEE.
Menna, F., Agrafiotis, P. and Georgopoulos, A., 2018. State of the art and applications in
archaeological underwater 3D recording and mapping. Journal of Cultural Heritage.
33. pp.231-248.
Tillman, S. B., 2017. Business Transactions and President Trump's Emoluments Problem.
Warren, C. S., Jonick, C. and Schneider, J., 2020. Accounting. Cengage Learning.
Online
The process of recording business transactions.2020. [Online].Available through:
<https://opentuition.com/fia/fa1/the-process-of-recording-business-transactions/>.