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Recording Business Transactions

BA30592E

Student Name

Student ID:

Word Count: 1901

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Table of Contents
Introduction........................................................................................................................3

Assessment-2....................................................................................................................3

Part A:............................................................................................................................3

a. Double entry of transactions in T-accounts............................................................3

b. General ledger of Linda where accounts are balanced to bring down the opening
balance.......................................................................................................................4

c. Preparing a trial balance.........................................................................................8

d. preparing an income statement..............................................................................9

e. A statement of financial is prepared.....................................................................10

f. Writing a brief letter to Linda explaining what drawings are concerning small
business....................................................................................................................10

and answering her query concerning her holiday....................................................10

Part B...........................................................................................................................11

i. Linda’s business ratio calculation..........................................................................11

ii. Comparing Linda’s business with competitors taking consideration into their
various ratios............................................................................................................11

Conclusion.......................................................................................................................13

References.......................................................................................................................14
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Introduction
This research studies the various business accounting processes including the analysis
of reporters, brochures, recorded revenue, analysis of ratio. This work reckons with the
different accounting processes of an organization (Braden and Allyn, 2016). The
research has revealed the status of the firm, if it is on the proper path and in which ways
the enterprise is in a precarious position, by comparing the ratio analysis, along with the
competitor's ratios. Finally, the study of the ratio has been clarified. Following a given
time, a corporation can recognize their economic practices by tracking financial
transactions (Balogh, 2017).

Assignment A2
Part A:
a. Double entry of transactions in T-accounts
Journal

Linda’s business

For October 2020

Date Account Titles Ref Debit Credit

.
2020 Bank A/C 8000
October 1 Cash A/C 5200
Machinery A/C 3000
Capital A/C 16200
October 2 Office Equipment A/C 1000
Bank A/C 1000
October 4 Purchases A/C 2450
Toys Ltd. A/C 2450
October 5 Bank A/C 1500
Sales A/C 1500
October 12 Repair and maintenance 80
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expenses A/C
Cash A/C 80
October 18 Toys Ltd. A/C 100
Purchases A/C 100
October 21 Bank A/C 500
Rental revenue A/C 500
September 23 Cash A/C 1500
Account receivable A/C 400
Sales A/C 1900
October 23 Cash A/C 500
Sales A/C 500
September 24 Machinery A/C 2500
Bank account A/C 2500
October 26 Wages A/C 820
Bank account A/C 820
October 31 Rental expense A/C 1000
Bank account A/C 1000
September 30 Drawings A/C 1600
Bank account A/C 1600

b. General ledger of Linda where accounts are balanced to bring down the
opening balance
Dr Bank A/C
Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 2020 Office 1000
Oct 1 Capital 8000 Oct 2 Equipment
Oct 5 Sales 1500 Oct
Rental
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Oct 21 revenue 500 26 Wages 820

Oct Machinery 2500
Balance b/d 3080 31 Rental expense 1000
Sep Drawing 1600
24 Balance C/D 3080
Sep
Oct
31

Dr Capital
Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 202 Bank account 8000
Oct 31 Balance c/d 16200 0 Cash 5200
Oct Machinery 3000
1 Balance b/d 16200

Dr Cash
Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 Capital 5200 2020 Repair and
Oct 1 Oct maintenance 80
Sep 23 Sales 1500 12 expenses
Oct 23 Sales 500 Balance c/d 7120
Balance b/d 7120 Oct
31
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Dr Machineries
Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 Capital 3000 2020
Oct 1 Oct Balance c/d 5500
2020 Bank A/C 2500 31
Sep 24
Oct 31 Balance b/d 5500

Dr. Office Equipment Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 Bank A/C 1000 2020 Balance c/d 1000
Oct 2 Oct
Balance b/d 1000 31

Dr Purchases
Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 Toys Ltd. 2450 2020 Toys Ltd. A/C 100
Oct 4 Oct
Oct 31 Balance B/D 2350 18 Balance c/d 2350
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Dr Toys Ltd.
Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 Purchases 202 Purchases 2450
Oct 18 return 100 0
Oct 31 Balance c/d 2350 Oct Balance B/D 2350
4

Dr Sales
Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 2020 Bank A/C 1500
Oct 31 Balance c/d 3900 Oct 5
Sep Cash 1500
23 Account 400
receivable
Cash 500
Oct Balance B/D 3900
23

Dr. Repair and maintenance expense

Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 Cash 80 2020 Balance c/d 80
Oct 12 Oct
Balance B/D 80 31
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Dr Rental revenue
Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 2020
Oct 31 Balance c/d 500 Oct Bank A/C 500
21 Balance B/D 500

Dr. Account receivable Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 2020 Balance c/d 400
Sep 23 Sales 400 Oct
Balance B/D 400 31

Dr Wages
Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 2020 Balance c/d 820
Oct 26 Bank A/C 820 Oct
Balance B/D 820 31

Dr. Rental expenses Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

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2020 2020 Balance c/d 1000

Oct 31 Bank account 1000 Oct
Balance B/D 1000 31

Dr Drawings
Cr

Date Explanation Ref. Amount Date Explanation Ref. Amount

2020 Bank account 1600 2020 Balance c/d 1600
Balance b/d 1600 Oct
31

c. Preparing a trial balance

Trial balance

For 31st October 2020

SL. Account titles ref Debit Credit

1. Bank account 3080
2. Capital 16200
3. Cash 7120
4. Machinery 5500
5. Office Equipment 1000
6. Purchases 2350
7. Toys Ltd. 2350
8. Sales 3900
9. Repair and maintenance expense 80
10. Rental revenue 500
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11. Account receivable 400

12. Wages 820
13. Rental expenses 1000
14. Drawings 1600
15.
16. Total 22950 22950

d. preparing an income statement

Income statement

For 31 October 2020

Explanation Amount Amount

Revenue:
Sales 3900

(-) Cost of goods sold

(+) Purchases 2350
(-) Return outwards (100)
(+) Wages 820
3070
(-) Inventory stock ( 31 October 2020) (250) (2820)
Gross profit 880
(-) operating expenses
Repairing expenses
80
Rental expenses
1000 (1080)
Income/loss from operations
(200)
(+) Rental revenue
500
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300

Net income

e. A statement of financial is prepared

Financial statement

For 31 October 2020

Explanation Amount Amount

Assets
Cash 7120
Bank account 3080
Machinery 5500
Office Equipment 1000
Account receivable 400
Closing inventory 250
Total assets 17350
Liabilities and owner’s equity
Toys Ltd. 2350
Capital 16200
(-) Drawings (1600)
Suspense account 400
Total liabilities and owner’s capital
17350

f. Writing a letter to Linda explaining what drawings are concerning small

business and answering her query concerning her holiday
Dear Linda,

A good thing is that you're on a work trip since you've been exhausted and have taken a
leave afterwards to rest a little rest.
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The truth is that for your ambitions, the holiday does not impact the financial condition of
the company, so holiday spending should not be considered the price of a firm. It is your
expense, so you must make sense of all that.

Regards.

Part B
i. Linda’s business ratio calculation
Ratios:

No. Equation Calculation

1 Net profit margin=Net profit/Net sales 300/3900×100 =8%
revenue
2 Gross profit margin = Gross profit/Sales 880/3900×100 =23%
revenue
3 Current ratio = Current asset/current 3080+7120+400+250/2350×100
liabilities =4.6
4 Acid test ratio= Current asset- (3080+7120+400+250)-
inventory/current liabilities 250/2350 =4.51
5 Accounts receivable collection 400/500÷365=292 days
period=Account receivable/Net credit
sale÷365
6 Accounts payable payment 2350/2350÷365=365 days
period=Account payable/Net credit
purchase÷365 (Francalanza, 2013)

ii. Comparing Linda’s business with competitors taking consideration into their
various ratios
The ratios would be contrasted to see the market competing role of Linda. This would
also be an explanation to the company, in which the enterprise wants to manage and
track their practices thoroughly (Ceil, 2019). A ratio analysis is a quantitative
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methodology to be visible when reviewing financial statements such as the balance

sheet and declaration of income within a company to gain insight into its efficiency,
organizational impacts and competition. The evaluative ratio is one aspect of a
foundational measure of consistency. The business documents of the equivalence
approach is calculated by the shortfall of the industry in the ratio review (Elliott and
Elliott, 2019). If business data is applied to a normal market, the contrast of the
percentage measurement versus comparing the evaluated ratio to equivalent
competition is greater. A comparative analysis allows investors to develop their
company's funding ratio data through owners of the enterprise with the private firm itself.
It guides the working and economic shifts and developments of a competing sector
(Ferdian et al., 2018).

Ratios Linda’s business ratio Competitors Average

Net profit margin 8% 31%
Gross profit margin 23% 54%
Current ratio 4.6 2.87x
Acid test ratio 4.51 1.35x
Accounts receivable 292 days 50 days
collection period
Accounts payable 365 days 72 days
payment period

The overall profits show how much productivity shows how much the company harvests
will produce major earnings now from the entire market value, and why there is more
demand again. In this respect, relative to competitors, Linda earns just eight percent,
Linda rivals gain 31 percent or almost 23 percent more compared to Linda. The net
income earnings ratio for Linda mean that every exchange gain less, which indicates
lower earnings. Therefore, rivals benefit 31 points, suggesting that the barrier is going to
have extra usefulness. Linda and her opponent's awards were well under her
competitors' ratio (Bai et al., 2009).
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In that case, the gross profit margin represents the viable wellbeing of Linda as sales
produced also agree with output rates. Since gross sales points to an enterprise's
willingness to capitalize on the costs of selling products and materials, Linda is less
establishing that its rivals have the potential to pay more attention. The Linda
management did not complete its behavioral processes optimally. They can also be
entered (Mahdi and Khaddafi, 2020). In the calculation of its commitments, the current
ratio requires the company to match its maximum properties and thereby defines the
ability to liquidate its remaining assets. If a firm has a larger present score than its
supporters, its willingness to lend accounts is superior than its rivals; (Purnomo, 2018).

In terms of its existing liabilities, Linda has the highest liquidity of the overall equity, as
expressed in this case. Linda's competitors have an asset of 2.87 dollars to obtain their
borrowing funds from Linda. More forms of current prices are evaluated that determine
as much as possible the ability of a company to repay short-term debt as part of its
liquid assets. The longer the company fee, the more is predicted that there is a loading
duty. Due to Linda's 4.51-its proportion of his counterparts to her, Linda can be
represented more fairly than its adversaries are approved as allowed of current
obligations, while its A1 distribution of only 1,35-fold in revenue is described as only
1.35-fold (Ferdian, Suryadi, and Safitri, 2018). The redemption period for the loan
presentation shows an estimated date which the company will confirm. It is proclaimed
to be a strong organization that can rapidly collect requests. The protracted
accumulation of payments attributable also results in a weak company for sovereign
debt (Lazorenko, 2017).

In that case, Linda would require 292 days to get all reimbursements, compared to a
typical payout of 50 days for her good partner. Linda is one of a set of high liabilities that
can be formed to stick to receivables as a less profitable business. Accounts payable
apply to the rate at which payable commitments or other amounts should be charged
during the applicable due date. Owing to its justice to be the trustworthy discretion for a
business that was willing to reverse its obligations, it will enroll credit institution payable
The payable fees Linda Islands is owned by here is 365 days to replace its distressed
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company Situation. Nevertheless, the person will be compensated with 72 days of

salary that is cheaper than Linda (Golub, 2020).

Conclusion
This study examined the varied possibilities for Linda's accounting including journal
analytics, schedule, declaration of revenue, and evaluation of the ratio. In comparing the
relationship-perception and the difficulty of the ads, this study demonstrated the
undertaking's role in determining that this company's condition is well on the right track
and is vulnerable to that in the markets. Third of the proportional assessment was the
ratio analysis was done (Dmitrieva, 2018). Organisations should stick to the
requirements and standards for this when formulating appropriate financial statements
used as an alternative project (Purnomo, 2018).
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References
Bai, Z., Wong, K., and Wong, W., 2009. An Improvement of the Sharpe-Ratio Test on
Small Samples. SSRN Electronic Journal,
Balogh, A., 2017. Financial Ratios for Accounting Research. SSRN Electronic Journal.
Braden, A. and Allyn, R., 2016. Accounting Principles. Toronto: Van Nostrand.
Ceil, C., 2019. Changes in Business Processes and Management Accounting
Techniques and strategies. SSRN Electronic Journal.
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Dmitrieva, I., 2018. Methods for Analysing Accounts Receivable and Accounts Payable
on Lease Payments. Upravlenets, 9(2), pp.47-53.
Elliott, B. and Elliott, J., 2019. Financial Accounting And Reporting. Harlow, United
Ferdian, R., Suryadi, E. and Safitri, H., 2018. Analisis Dividend Payout Ratio (DPR),
Gross Profit Margin (GPM), dan Net Profit Margin (NPM). JURNAL
PRODUKTIVITAS, 5(1).
Francalanza, C., 2013. Accounting education and change in financial
accounting. Journal of
Golub, N., 2020. ACCOUNTS PAYABLE AT THE ENTERPRISE. Market Infrastructure,
(42).
Kingdom: Pearson Education Limited.
Lazarenko, V., 2017. INFORMATION TECHNOLOGIES OF THE ENTERPRISE
FINANCIAL STABILITY ASSESSMENT. Economic Analysis, (27(2), pp.156-161.
Mahdi, M., and Khaddafi, M., 2020. The Influence of Gross Profit Margin, Operating
Profit Margin, and Net Profit Margin on the Stock Price of Consumer Good Industry
in the Indonesia. International Journal of Business, Economics, and Social
Development, 1(3).
Purnomo, A., 2018. Influence of The Ratio of Profit Margin, Financial Leverage Ratio,
Current Ratio, Quick Ratio Against The Conditions and Financial
Distress. Indonesian Journal of Business, Accounting, and Management, 1(1).