14 Pages
3547 Words
Introduction Of The Recording Business Transactions Assignment
Trust New Assignment Help for unparalleled assignment writing services in the UK. With our attention to detail and commitment to excellence, we guarantee academic success.
The essay includes a brief introduction to Arnold Clark Finance Ltd. that is considered a case company for better understanding all the highlights of the essay. A deep explanation of accounting principles along with their importance in preparing a company's accounts concerning the case company is discussed in this essay. An overview of double-entry bookkeeping is explained in the essay while considering the Arnold Clark Company. The knowledge of prime entry of books in a company is also discussed in the study. The essay contains an understanding of the main process of accounting in general as well as from the perspective of a case company.
As every company has to maintain its accounts from time to time for effective growth and survival in the market, the information of different accounting equations and financial statements are discussed in the essay. Accounting equations and financial statements used by Arnold Clark automobiles ltd are explained in this study.
Brief introduction of Arnold Clark Company
Arnold Clark was founded in 1954, as a privately owned the UK’s leading car retailer. Per year the company has an excess selling of 250000 vehicles and generating over £3 billion as an annual turnover. The first showroom of Arnold Clark was established in Glasgow’s Park Road, UK. In 1960, the company purchased three garages in Bearsden, Paisley, and Bothwell Street. Arnold Clark Company launched the finance arm which means Arnold Clark Finance Limited, in the year 1963 (Arnold Clark, 2022). Arnold Clark Company also has a website to easily connect with its customers.
The company's mission statement says that a high level of customer satisfaction is to be created along with offering them genuine value for their money. Arnold Clark Automobiles Ltd, the aim is to inspire, innovate, grow and continue the business while focusing on its mission. The company has all over 160 service centers, 193 dealerships, around 20000 cars in stock, 14 parts centers, and 17 accident repair centers. The company also actively participates in corporate social responsibility in which it is providing support for charities, sponsorship, local businesses, and many more. Arnold Clark provides vehicles on a lease and rent basis. The company also provides services like consultancy, fuel cards, contract hire, contract purchase, maintenance, and fleet management.
The accounting principle and the importance of accounting for Arnold Clark Financial Ltd.
There are 13 basic accounting principles that restrict an organization within the boundary of rules and regulations when reporting financial information. The accounting principles consist of accrual, conservatism, consistency, cost, economic entity, full disclosure, going concern, matching, materiality, monetary unit, reliability, revenue recognition, and period principles(Weygandt, et. al. 2019).
As the case company follows all the accounting principles which align the company's accounting activities properly within the boundaries of accounting standards. According to the accrual principle, the company should record all its accounting transactions on the date when they occur not on the associated cash flow date. The company uses the accrual concept of accounting principles to estimate its actual financial position. From the first, a case company undertakes performance on obtainable apprehension concept. As the going concern concept principle says that business remains in the operation for a predictable future and it has long-term survival in the market(Babicheva, et. al. 2018). The going concern principle helps the company to predict the financial future and long-term survival.
The case company also focuses on the period principle as the company has to prepare its financial statements on a fixed accounting period. The company pays attention to the matching concept of accounting principles and records its revenue as well as related expenses at the same time. The matching principle implies the accurate position of a company with its actual financial capability. Inside the outline of all the accounting principles, Arnold Clark Company increases its revenue per year and keeps growing every upcoming year.
The main process of accounting
To record any financial transaction the company needs to go through some relatable terms which affect the accounting of a business. The term double entry bookkeeping refers to that accounting system in which each financial transaction keeps recorded in at-least two relatable accounts of a company(Sangster, 2016). The company must show a single transaction in two accounts in which one account is debited and the second one is credited by the same amount. Talking about the term books of primary entry means the books in which the company first records all its transactions with the start of its accounting period. At the end of the year when a company is going to prepare its financial statements those transactions are taken into consideration for preparing accurate financial transactions. The accounting equations provide accuracy of the data which are recorded by the company(Ghofirin, and Wahyuningtyas, 2021). The accounting equation shows an exact position of a company with a basic principle of fundamental and accounting basics of a balance sheet.
Accounting equation: - Assets = liabilities + stockholder’s equity
The process of accounting contains eight steps that are discussed below(Osadcha, et. al. 2018):
Identify the transaction- This is the primary move of the accounting process in which the company has to identify all monetary and financial transactions.
Recording of transactions in a journal- For each accounting transaction, the company has to create a journal entry to bring out the credited and debited accounts.
Posting in a ledger- All the transactions which are recorded in the journal are then transferred to the general ledger.
Unadjusted Trial Balance- The company prepares the trial balance to check whether the debits and credits are equal or not.
Adjusting Journal Entries- On the accrual root of accounting, some transactions are record at the end of the year which are to be adjusted in journal entries.
Adjusted trial balance- After adjusting transactions in journal entries again the company has to make adjustments to the trial balance.
Preparation of financial statements- The financial statements of a company includes a cash flow statement, trading and profit, loss account, and balance sheet which shows the actual financial position of a company in the market.
Closing entries- the last step of the accounting process includes the transfer of entries from temporary accounts to permanent accounts.
Conclusion
From the above-mentioned report, it is concluded that Arnold Clark Financial Ltd has an effective financial position in the market. The company has a strong background from the past 60 years which make a company a leading company in car retailers. Arnold Clark Company prepares its accounts and financial statements within the boundary of all rules that are prescribed by the accounting standards. The company follows all the steps of the accounting process to fulfill the accuracy and preparation of accounts within a timeframe.
References
Arnold Clark, 2022. ABOUT US (online). <https://www.arnoldclark.com/about-us/> (accessed on 22 October 2022).
Babicheva, N.E., Lyubushin, N.P. and Kondrat'ev, R.Y., 2018. The going concern concept in the assessment of creditworthiness of economic entities. Regional'nayaekonomika: teoriyaipraktika= Regional Economics: Theory and Practice, 16(1), pp.18-37.
Ghofirin, M. and Wahyuningtyas, E.T., 2021. Simple Accounting For Surabaya's SMEs From Accounting Equations To Financial Statements. Community Development Journal, 5(1), pp.219-225.
Louis S, 2021. The Accounting Cycle – Explained for Dummies (online). <https://sashares.co.za/accounting-cycle/#gs.ftc4dy> (accessed on 22 October 2022).
Osadcha, O.O., Akimova, A.O., Hbur, Z.V. and ?rylova, I.I., 2018. Implementation of accounting processes as an alternative method for organizing accounting. Financial and credit activity problems of theory and practice, 4(27), pp.193-200.
Sangster, A., 2016. The genesis of double entry bookkeeping. The Accounting Review, 91(1), pp.299-315.
Weygandt, J.J., Kieso, D.E., Kimmel, P.D., Trenholm, B., Warren, V. and Novak, L., 2019. Accounting Principles, Volume 2. John Wiley & Sons.
Assessment 2
Introduction Of The Key Responsibilities For All The Business To Identify The Transaction And Recording It In The Books Of Accounts
Recording business transactions refers to a process of multiple steps. It is a key responsibilities for all the business to identify the transaction and recording it in the books of accounts(Rohr-Mentele, and Holtsch, 2022). The key highlights of the report is books of primary entry, ability to record and summarise accounting information, maintaining accurate books of accounts, and ability to develop business decisions while using financial information. The report includes understanding of two different types of business with their advantages and disadvantages. The study also contains five steps procedure for starting a new business in the context of finances. Trial balance and jounal entries are also discussed in the report with an example. This report also involves numerous settlement and restrictions of trial balance in any industry.
Part A
The advantages and disadvantages
A sole trader refers to a person who runs a business or is self-employed. If a person starts the business even when registration has not yet been done, then also that person is to be considered a sole trader(Formosa, 2018). On the other hand, a business under the partnership is established when two or more persons made a formal agreement on the account of the distribution of responsibilities and profit or loss. “The Indian Partnership Act, 1932” contains all guidelines to incorporate and run this type of business(Usman, and Javokhir, 2021). Before deciding on establishing any business, the person should analyze all types of business and then select the best suitable business type. The founder should examine both advantages and disadvantages of different types of business.
Sole trader advantages and disadvantages:-
| S. No. |
Advantages |
Disadvantages |
| 1 |
A sole trader has more freedom in the decision-making and running of the business and the person becomes his boss. |
A sole trader business gets limited managerial expertise and there is no one to share decision-making. |
| 2 |
A sole trader can keep all the profits of a business. |
There is an unlimited liability on the owner of a business. |
| 3 |
It is very easy to start a business as a sole trader for any person. |
The chances of business continuation in the future are very low. |
| 4 |
As the company owner is one person only then there is more privacy in the business. |
This type of business is not suitable for large-scale operations. |
| 5 |
The start-up cost of this business is very low compared to others. |
The company gets limited resources and limited finance. |
Partnership advantages and disadvantages:-
| S. No. |
Advantages |
Disadvantages |
| 1 |
The burden of business operations is shared among the partners (Efendi, et. al. 2021). |
The partners get unlimited liability for a business in shared form. |
| 2 |
There is access to skills, contacts, knowledge, and experience in the partnership business. |
More partners bring more different ways of handling the business which generates possibilities of conflicts and differences in an organization (Bimpis, 2020). |
| 3 |
In the partnership business, more partners bring more capital into the business. |
The partnership business finds it difficult to raise money from outsiders as there is limited access to capital for this type of business in the market. |
| 4 |
It is easy to start a partnership business as fewer legal and formal obligations are required. |
As a partnership business has no legal status, it can cause instability and insecurity in the growth and development of the business. |
| 5 |
Each partner brings a unique perspective of all decisions which benefit the business to make effective decision-making. |
This type of business brings more difficulties in decision making and there can be a slow process of decision-making. |
Errol Anderson should go with the sole trader as on the starting of a car repairing and servicing business. As the government also gives benefits upto£25,000 to new start-up businesses in the UK, the person gets easy capital and new development ideas for the business.
5 steps for starting a new business
To start a new business the person should follow various steps in establishing a process of business(Harris, 2018). The main five steps of starting a new business are discussed below:
Plan- This is the first step of starting a new business. The person should have to choose or decide on a name for the business and its products. The blueprint for business success and the location of a company's building are going to be decided under this head. From a financial point of view, a businessman has to plan the cash flow and investment in the business.
Register- The business has to be registered under its accomplished law developed by the government. The company has to create a legal structure for its business. To get a legal establishment with legal protection an organization has to be registered with the government. Like, 3.5m sole traders, 405000 partnerships, and 2 million trading limited companies are registered under their respective laws in the UK.
Finance- In this step, a businessman has to keep a record of sources and allocation of funds that are in need to establish and run the business. A capital structure planning and dividend strategy is made in this third step of the start-up business. The management of finances and their implementation is provided under this head.
Run- the Company has to undertake various services, hardware, and software to continue business operations. The cost of tackling trendy technology, business insurance, internet services, etc. is identified in this step.
Sell- To sell the business product and services, the company has to invest in marketing, promotions, and sales activities also. A customer service, lead tracking software, and sales or marketing plan are included in this step. The company has to plan its marketing and promotional activities according to the finance available and the reach of a business in the market.
Part B
- Journal entries of Kavan’s business
(For the year end march, 2021)
| Date |
particulars |
L.F. |
Debit amount(£) |
Credit amount(£) |
| 1 March |
Purchase A/CDr. To Y and Co. A/C (Purchased goods from Y and Co. on credit) |
60,000 |
60,000 |
| 2 March |
D and Co. A/C Dr. To sales A/C (Sold goods to D and Co. on credit) |
30,000 |
30,000 |
| 3 March |
Y and Co. A/C Dr. Discount allowed A/C Dr. To bank A/C (Paid Y and Co. through a bank in full settlement) |
58,000 2,000 |
60,000 |
| 5 March |
L A/C Dr. To sales A/C (Sold goods to L on credit) |
20,000 |
20,000 |
| 6 March |
M A/C Dr. To sales A/C (Sold goods to M on credit) |
40,000 |
40,000 |
| 7 March |
Bank A/C Dr. ToM A/C ToDiscount received A/C (Received a cheque from M in full settlement and deposited the same to the bank) |
40,000 |
39,000 1,000 |
| 8 March |
Y and Co. A/C Dr. To purchase return A/C (Goods returned to Y and Co) |
4,000 |
4,000 |
| 9 March |
Cash A/C Dr. To L A/C ToBad debts A/C (L became insolvent and only 90p per pound is received by cash in the final settlement) |
20,000 |
18,000 2,000 |
| 10 March |
Sales return A/C Dr. To M A/C (Goods returned by M) |
3,000 |
3,000 |
| Total |
2,77,000 |
2,77,000 |
- ABC
Trial Balance (As of 31 August 2021)
| S. No. |
Particulars |
Debit amount(£) |
Credit amount(£) |
| 1 |
Sales |
41,700 |
| 2 |
Purchases |
34,680 |
| 3 |
Receivables |
6,790 |
| 4 |
Payables |
5,650 |
| 5 |
General expenses |
12,760 |
| 6 |
Loan |
10,000 |
| 7 |
Plant and Machinery at cost |
5,000 |
| 8 |
Motor Van at cost |
6,000 |
| 9 |
Drawings |
2,000 |
| 10 |
Rent and rates |
6,700 |
| 11 |
Insurance |
4,000 |
| 12 |
Bank overdraft |
510 |
| 13 |
Capital |
20,000 |
| 14 |
Surplus |
70 |
| Total |
77,930 |
77,930 |
The benefits and limitations of the trial balance in a business Organisation
A trial balance is a statement in which all credits and debit sides are kept in a double-entry account book while indicating any error or disagreement (Simanjuntak, et. al. 2022). There are various advantages and benefits of preparing the trial balance for any business. The company can prepare a trial balance to check whether the debit amount and credit amount are equal or not. But the trial balance cannot protect against omission errors, commission errors, or principles errors. Trial balance helps in preparing effective financial statements for a company at the end of the year. On the other hand, it cannot prove that all the transactions have been recorded or not and ledger is correct or not. It provides a list of all accounts in a single place with locating all the errors in the journal and ledger account. Whereas one of the limitations of the trial balance is that several errors may occur when both columns of the trial balance agree.
Conclusion
From the report it is concluded that there are different types of businesses but the founder should choose a suitable business according to the finances, resources, and risk adaptability criteria of business. The proper follow up process to establish a new business will lead an effective business planning and strategy with a greater allocation of funds. An advantages and disadvantages of trial balance help to extract the importance of it in the business. The format of journal entry and trial balance is reflected by some questions in this report.
References
Bimpis, G., 2020. Public-Private Partnership (PPP) in Transport Sector–Comparative analysis of the Greek versus the EU system–Advantages and disadvantages.
Efendi, N., Syamsudidin, A., Wasliman, I. and Arifin, D., 2021. Quality Improvement Management Based on Partnership and ICT Advantages. EARR (Educational Administration Research and Review), 5(2), pp.146-155.
Formosa, A.M., 2018. From a sole trader to a company: a legal and financial analysis (Master's thesis, University of Malta).
Harris, T., 2018. Start-up: a practical guide to starting and running a new business. Springer.
Rohr-Mentele, S. and Holtsch, D., 2022. Recording Business Transactions in Textbook and Receipt Form. Vocations and Learning, pp.1-31.
Simanjuntak, Y.S.M., Ardiansyah, A. and Muda, I., 2022. Prepare a Trial Balance and The Function. Journal of Positive School Psychology, 6(3), pp.2405-2410.
Usman, S. and Javokhir, A., 2021. Public-private partnership and its definition. ?????????????? ? ????????, 7(5), pp.362-369.
