Recording Business TransactionsBA30592E1 | P a g eUNIVERSITY OF WEST LONDONThe Claude Littner Business SchoolRecording Business transactionAssignment A2Submission Deadline: Part ALindastarted the business of buying and selling toysin Oxfordon the 1stof October 2020.
She is preparing 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 Oxforda nd
paid by cheque 4/10
Purchased toys (goods)£2450on credit from Toys Ltd5/10 Sold goods for £1500and received the money in Bank12/10
Paid in Cash £80for repairing laptop18/10
Goods returned toToys Ltd £10021/10Received rent 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 cash
24/10Bought a second-hand car from Oxford motor vehicle auction for business use by issuing a cheque £250026/10
Paid 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.
She has 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-accounts19 marks
RecordingBusinessTransactionsBA30592E2| P a g e
b)Balance the accounts and bring down an opening balance8 marks
c)Extract a Trial balance as at31st October 202016 marks
d)Prepare an Income Statement forthe period ended 31st October 202013marks
The closing inventory is £ 250.00
e)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 her holiday.5 markTotal Marks 76PART
B
i.According tothe information available in Income and Financial position statementsin
Part A,
calculate the following ratios for Linda’s business Competitors 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)
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