Date

First Name Faisal

Last Name Saif Ullah
(1.1) Accounting;
The process of recording a company's financial transactions is known as accounting. The
accounting process includes summarizing, evaluating, and reporting these transactions to
oversight authorities, regulators, and tax collection organizations.
(1.2) Range of common accounting terms
Assets
Anything with monetary value and/or a future benefit qualifies as an asset.
A machine, a financial instrument, or a patent, for example, can all create future cash flows. A
home, automobile, investments, artwork, and household items are all examples of personal
assets.
Assets are reported on a balance sheet and then subtracted from liabilities and equity.
Liabilities
Anything owed to someone else in general is referred to as a duty.
A liability is a legal or regulatory risk or obligation.
In corporate accounting, liabilities are recorded first, followed by assets.
Current liabilities, which are short-term financial commitments due within a year or within a
normal business cycle, include accounts payable and taxes outstanding.
Long-term (non-current) relationship
Revenue
Revenue is the amount of money earned by an individual or a business through the selling of
goods or services. One of two elements on an income statement that defines a company's
profitability is revenue, often known as "sales."
The other factor is the expense.
To maximize profit, all businesses aim to increase revenue (also known as "top line" or
"gross income") while reducing expenses. It is displayed as net income on a net income
statement (or "bottom line").
Sales revenue, rental income, dividend revenue, and other forms of revenue are all made up
of two main components: the cost of each product or service and the number of units sold.
Expenses
An expenditure is the cost of operations that a company incurs in order to generate revenue.
Businesses can deduct tax-deductible costs from their income tax returns if they follow IRS
requirements.
Accountants use one of two financial accounting systems to record expenses: cash basis or
accrual basis. In accounting, there are two types of business expenditures: operational
expenses and non-operating expenses.
Capital costs are treated differently by the IRS than most other business expenses.
Net income
The Income Statement, one of a company's major financial statements, shows the company's
profit and loss over time. All revenues are added together, and all expenses from both
operational and non-operating activities are subtracted to calculate profit or loss. In
corporate finance, the income statement is one of three financial and accounting statements
(including financial modeling). The income statement logically and consistently depicts the
company's revenue, expenses, gross profit, selling and management expenditures, other
income statements, taxes paid, and net profit.
(1.3) The different form of business unit.
A limited liability company (LLC) is a company created for the exclusive purpose of
conducting business. Your firm's money are kept separate from your personal
finances, unlike a lone trader or partnership. Profits are available for distribution as
dividends to shareholders after corporate taxes have been paid.
 A sole trader?
A sole trader is an independent contractor that owns and operates their own
business (but can also employ staff members).As a single trader, you are fully
responsible for the firm and its responsibilities - the company and the owner are
essentially synonymous. This means that any damages the firm suffers must be
paid for out of your own pocket. "Unlimited Liability" is the term used to
describe this situation.
 A partnership?
If your company is owned and managed by a large number of people, you should
consider how it is organized as a partnership. The two forms of partnerships are
common partnerships and restricted partnerships. The partners in a general
partnership run the company and are responsible for each other's debts and
other responsibilities. Both general and limited partners are involved in a limited
partnership. The general partners are the owners and operators of the firm, and
they are responsible for it, whereas the limited partners are just investors. They
don't have any influence over the company and aren't bound by the same rules
as the general partners.
 A limited partnership?
A Limited Liability Partnership (LLP) is a business in which two or more people
own and operate it. The partners are not personally responsible for the
company's commitments; their liability is limited to the amount of money they
invest. The financial incentives and obligations of each party are defined in an
LLP agreement.

(2.1) measures of money.

The money supply may be measured in a variety of ways. Narrow money, e.g. M0, is the
total amount of notes and coins in circulation plus the Bank of England's operating
balances. M4 money supply, for example, is defined as a combination of notes and
coins in circulation (M0) plus bank accounts.
 What is the M0's definition?
M0 is made up of bankers' deposits at the Bank of England and money in
circulation.
 What is the M4's definition?
All goods, certificates of deposits, and wholesale bank and building society
deposits are included in M4.

(2.2)
Customers will have more money to spend if they pay less interest, resulting in a ripple effect
of increased economy-wide expenditure. Companies and farmers are also attracted to
purchase large pieces of equipment because of the low financing rates.
For the government, rates are crucial.
The actions of central banks, such as the Federal Reserve, have an impact on short and
variable interest rates. If monetary policymakers aim to limit the amount of money in
circulation, they will raise interest rates, make depositing funds more appealing, and reduce
central bank borrowing.

(2.3) Exchange rates affect businesses

The amount of foreign money that can be bought with a unit of one currency, such as the
pound sterling, is known as exchange rates. When the pound's value rises, one pound may
purchase more foreign currency for the same amount of money, Because the value of
products fluctuates a lot, importers and exporters of goods must pay close attention to these
exchange rates. Cutting and altering on a regular basis Businesses that trade domestically
must be aware of changes in currency rates, since they will have an indirect impact owing to
the wider economy.

(2.4) Effects of inflation on a business

1) Positive effects:
 Increased revenues are possible thanks to pricing increases across the sector.
 A greater gross profit is achieved by increasing revenues while keeping a consistent
gross margin.
 In practice, this lowers the cost of using debt as a source of capital.

2) Negative effects:
 Inflation may prevent a company from passing on higher costs to consumers (PED).
 Business plans may be thrown off by inflation, and investment may be reduced.
 Higher interest rates are linked to rising inflation, which stifles economic growth and may
lead to a recession.
 JOURNAL ENTRY

DATE PARTICULAR DR CR
Cash A/c Dr. 2500
To James smith’s capital A/c 2500
(capital introduced in business by
James smith)
Phone screens expense A/c Dr. 750
To cash A/c 750
(purchase of 25 phone screens with
cash)
equipment A/c Dr. 1000
To accounts payable 1000
(purchase of computer equipment on
credit)

Cash A/c Dr. 2000

To phone screen sales A/c 2000
(sold 20 phone screens)
Wage expense A/c Dr. 500
To cash A/c 500
(payment to wages in cash)
Phone cases expense A/c Dr. 800
To cash A/c 800
(Purchase of phone cases in cash)
Cash A/c Dr. 1600
To phone cases sales A/c 1600
(sales of phone cases)
accounts payable A/c Dr. 100
To cash A/c 100
( paid to computer supplier co.)
Phone screen W/O Dr. 30
To Inventory A/c 30
(Phone screen damage during
repairing)
TRIAL BALANCE

Particulars Debit Credit

3950
Cash A/c
2500
Capital A/c
600
COGS-Phone screen A/c
1000
Computer Equipment A/c
 900
Accounts payable
2000
Phone screen sales A/c
1600
Phone cases sales A/c
500
Wages A/c
800
Phone cases purchase A/c
30
Phone screen W/O
120
Inventory A/c
Total 7000 7000

INCOME STATEMENT

£ £
Income
Phone screen sale 2000
Phone cases sale 1600
Total Revenue 3600
Expenses & Loses
Cost of Goods Sold–phone screen 600
Cost of Goods Sold-Phone cases 800
Phone screen W/O (Written Off) 30
Wages 500
Total Expenses & Loses -1930
Net Income 1670

BALANCE SHEET

Liabilities Amount Asset Amount

James smith capital 2500 Cash 3950

Account payable 900 Computer Equipment 1000

(computer supplier
company)
Net Income 1670 Phone screen 120
 expense – Inventory
TOTAL 5070 TOTAL 5070

Assumption: All of the phone covers that were purchased have been sold, and there are just 5
phone screens left, one of which is damaged. The cost per screen indicated is 30 pounds,
implying a total loss of 30 pounds. A total of 120 pounds of closing stock would be available for
four phone displays.

E. Which is more profitable, the sale of phone cases or the sales of repaired screen?

Phone Screen Phone cases

Sales 2000 1600
Less: Purchases 750 800
Less: Closing stock excluding 150 0
W/O (Written Off)
Cost of goods Sold 600 800
Gross Margin 1400 800

Phone covers are a popular item that will be purchased in large numbers. A regular cell phone
repair business, on the other hand, might bring in $500 to $650 per month, with greater earning
potential if you get better and more successful.

The mobile phone repair business can be very profitable and beneficial. To create a successful
company, though, you must provide high-quality products and services. I would recommend
James smith to continue his business.