Recording Business TransactionsBA30592E1 | P a g eUNIVERSITY OF WEST LONDONThe Claude Littner Business SchoolRecording Business transactionAssignment A2Submission Deadline: Part A
Lindastarted the business of buying and selling toysin Oxfordon the 1stof October 2020. She ispreparing accounts to 31st October2020. She contributed to the business with £8,000in the Bank, £5200 cash, and 3,000 Van. The transactions during themonth areas follows:2/10Bought a new Laptop £1000 from a local shop in Oxfordand paid by cheque4/10Purchased toys (goods)£2450on credit from Toys Ltd5/10 Sold goods for £1500and received the money in Bank12/10Paid in Cash £80for repairing laptop18/10Goods returned toToys Ltd £10021/10Receivedrent for part of the premises by cheque £50023/10Sold goods to Fred£1900; from this amount £1500cash received immediately andthe rest remainson credit.23/10Sold goods of £500 to David and received cash24/10Bought a second-handcar from Oxford motor vehicleauctionfor business use byissuing a cheque £250026/10Paid the month ’s wages to the part-time shopkeeper by cheque£82030/10Paid rent by cheque £100031/10Linda has also paid £1600from the business bank account for a week-long holiday in Florida. Shehas asked you whether she can class this as business expenses since it hasenabled herto recover from the stresses and strain of running herown business.
Required:a)
Write double entry record the transactions in T-accounts 19 marks
RecordingBusinessTransactionsBA30592E2| P a g eb)Balance the accounts and bring down an opening balance8 marks
c)Extract a Trial balance as at31st October 202016 marksd)Prepare an Income Statement forthe period ended 31st October 202013marks
The closing inventory is £ 250.00e)Prepare a Statement of Financial Position as at 31st October 202015marks
f)Write a brief letter to Linda explaining what drawings are concerning small business and answering her query concerning herholiday.5mark
Total Marks 76
PART B
i.According tothe information available in Income and Financial position statementsin Part A,calculatethe following ratios for Linda’s businessCompetitors Average•
Net profit margin31%
•Gross profitmargin54%
•Current ratio2.87x
•Acid test ratio1.35x
•Accounts receivable collection period50 days
•Accounts payablepayment period72days(12 marks)ii.Assuming Linda’s competitor’s ratio averagesare as stated above:Analyse herperformance with reference to each of the ratios calculated in comparison to those of her competitor. (Maximum of 500 words).(12marks)(Total 100 Marks)
