RECORDING BUSINESS TRANSACTIONS

Student Name
Student ID
Course ID
Date
 2

Part A
Advantages and Disadvantages of sole trader business and partnership
 
Advantages of a sole trader business:

1. Ease of set-up and low start-up costs.

2. Flexibility in decision making.

3. Retention of all profits.

4. Privacy and confidentiality.

5. Easier to wind up the business.

Disadvantages of a sole trader business:

1. Unlimited personal liability.

2. Limited financial resources.

3. Limited expertise and skills.

4. Limited life of the business.

5. Difficulty in raising capital. 

Advantages of partnership business:

1. Sharing of risks, responsibilities and profits.
2. Access to a wider range of skills and expertise.
3. Greater financial resources.
4. Ease of raising capital.
Disadvantages of partnership business:

1. Unlimited personal liability.

 3

2. Disagreements among partners.

3. Difficulty in dissolving the partnership.

4. Sharing of control and decision making.

5. Lack of privacy and confidentiality. 

5 steps to start a new business
1. Create a company strategy: that details your desired outcomes, intended clientele, key
competitors, and projected profits.
2. Determine your company's legal structure: Make a selection on whether your business
will be a single proprietorship, a partnership, an LLC, or a corporation.
3. Register your business: Register your business with the relevant government agencies,
like the Business Registration Office, and get any licences and permits you need.
4. Obtain funding: Whether via conventional loans, crowdsourcing, or venture capital, get
money to keep your firm running.
5. Establish your system: Get a physical site set up, stock it with products, and recruit staff
if required.
 4

Part B
Journal Entries :
Date Account Titles Debit Credit
01-03 Purchases                               £ 60, 000
            Account Payables                                      £ 60, 000
To record purchase on credit from Y and Co.
 
02-03 Accounts Receivables               30, 000
                   Sales                                                               30, 000
To record sales on credit to D and Co.
 
03-03 Accounts Payable                         60,000
               Bank                                                                58, 000
                              Purchase Discount                                          2, 000
To record full payment of account to Y and Co.
 
04-03 Cash                                                30, 000
                   Accounts Receivable                                    30, 000
To record full collection from D and Co.
 
05-03 Accounts Receivable                       20, 000
                  Sales                                                                20, 000
To record sales on credit to L
 
06-03 Accounts Receivable                       40, 000
                   Sales                                                                40, 000
To record sales on credit to M
07-03 Cash                                                  39,000
            Sales Discount                                    1,000
            Accounts Receivable                               30, 000
 5

To record full collection from D and Co.

08-03 Cash                                                     2, 000
             Purchase Returns                                                2, 000
To record goods returned to Y and Co.
 
09-03 Cash                                                18, 000
              Bad Debts Expense                        2, 000
           Accounts Receivable                                      20, 000
To record full collection from D and Co.
 
10-03 Sales Returns                                     1, 000
    Accounts Receivable                                            1, 000
                       To record goods returned by M
 6

 
 
  2a)   ABC’s Trial Balance as of 31 August 2021

ABC
Trial Balance
as of August 31, 2021

Account Debit Credit

Receivables 6, 790 
Plant and Machinery at cost 5000
Motor Van at cost 6000
Bank Overdraft 580
Payable 5,650
Loan 10,000
Drawing 2,000
Capital 20,000
Sales 41,700
Purchase 34,680
General Expenses 12, 760
Rent and Rates 6,700
Insurance 4,000
Total 77,930 77,930

  
  
 7

2b)   Benefits and Limitations of Trial Balance

The trial balance is used to verify the accuracy of the general ledger's debit and credit totals. It's
the final thing you do before putting together financial accounts, and it ensures that your books
are error-free.
Benefits of trial balance in a business organization:
1. It is a quick and easy way to verify the accuracy of your financial records.
2. It is a practical resource for ensuring the correct implementation of the double-entry
accounting system.
3. This structure may be used to build financial statements.
Limitations of trial balance in a business organization:
1. The trial balance is useful for spotting accounting errors, but it does not guarantee the
accuracy of the financial accounts.
2. It does not detect omissions or misclassifications, such as when a transaction is not
included or is assigned to the incorrect category.
3. In addition, it provides no information on the company's finances or activities.
 8

Reference
Harris, R., 2020. Going the Distance: Eurasian Trade and the Rise of the Business
Corporation, 1400-1700. Princeton University Press.