Business Transactions

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University of West London *

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Accounting

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Nov 24, 2024

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ASSIGNMENT 1 STUDENT’S NAME: UWL ID: CAMPUS: TUTPR’S NAME DATE: RECORD ING BUSINES S TRANSA CTIONS

1 Table of Contents Introduction ................................................................................................................................................. 2 Accounting Principles and Their significance in the Healthcare Company. ................................................ 3 Accounting Principles .............................................................................................................................. 3 Importance of accounting in Spire Healthcare ......................................................................................... 5 Accounting Process ..................................................................................................................................... 6 Conclusion ................................................................................................................................................. 11 Bibliography ............................................................................................................................................... 12

2 Introduction Spire Healthcare is a public limited company categorized in the Healthcare industry. The company was founded in 2007 after Bupa Hospital’s sale to Cinven, preceded by the purchase of Thames Valley hospital and Classic Hospital in 2008. It operates 39 private hospitals and eight clinics across the UK. Its headquarters is situated in London, UK, and it offers services such as care for inpatient and outpatient, diagnosis, and other daily cases which focus on private care. The company's key people are Garry Watts and Justin Ash, the Chairman and CEO, respectively. The company is listed as the second largest company in the provision of Private Healthcare in the United Kingdom by London Stock Exchange. Spire serves about 870 000 inpatients and daycare patients across the World, having a total of almost 8,150 trained consultants. The company was affected by Covid 19 in that it placed its colleagues, facilities, equipment, and services at the disposal of the NHS in the year 2020 to support the tackling of Covid 19 pandemic. Hence, the Group lost 18.5 million Euro pounds adjusted before tax (Spire Healthcare, 2022). Spire's Revenue standings for at 2021 financial year are as follows; £ 1,106.2 million, £ 81.1 million, and £ 81.1 million, standing for Revenue, Operating income, and Net income, respectively (Spire financial statement, 2022).

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3 Accounting Principles and Their significance in the Healthcare Company. Accounting Principles Accounting Principles are the rules followed by organizations while reporting their financial information (Corporate Finance n.d). Five basic principles which are applicable in many sectors, including healthcare, are; The Revenue Principle (Revenue Recognition Principle) The concept implies that businesses should recognize revenue after completing the earning process, allowing them to keep track of their accounts ( Weygandt et al., 2019). Example Spire healthcare recognizes revenue to depict services transferred to clients in an amount that reflects the consideration that company expects to be granted in exchange for services. The Expense Principle (Expense Recognition Principle) The basic principle states that expense occurs once the customer receives goods or when the company performs the service. Example

4 Spire provides inpatient service to its customer worth 1000 pounds; the company recognizes the revenue upon finishing to offer the service even if the payment from the patient will delay for several weeks. Matching Principle The principle implies that revenues and expenses included in the income statement must match the period ( Weygandt et al., 2019). Example Spire Company Purchased an Anesthesia machine for £ 50,000 in 2018; the device is expected to last for six years, implying that it will produce services for the projected time. The machine's price matches the revenue it is creating for the company, which means that the company charges the machine's tag price to the depreciation expense of 8333.3 pounds yearly for six years. Going Concern The principle asserts that a business will carry on its operation into the future for a more extended life expectancy than its assets (Horngren et al., 2012). Example

5 The Spire faced a considerable challenge in coping with the high demand for healthcare due to covid 19 pandemic; the pandemic caused a loss of 18.5 million Euro pounds. Still, the company managed to continue operating in going concern. Full Disclosure The principle states that the company has to disclose all relevant material data relating to its financial position and operating results ( Weygandt et al., 2019). Example Spire discloses the information about its agreement deal with NHS in 2020. The agreement was about NHS taking over Spire's clinic during the covid 19 pandemic. Importance of accounting in Spire Healthcare Accounting plays a vital role in systematic record-keeping of the company's financial information. It facilitates decision-making among the people who plan, organize and run the company and communicates its results to its stakeholders (Powell, 2022). For instance, Spare Healthcare uses accounting to prepare a thorough daily operations audit, which enables the management team to predict the company's financial health at any time; the information recorded is also kept for future reference and used by the stakeholders to decide on the company’s future. The company also operates accounting in drafting its realistic budget for optimal performance.

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6 Accounting Process The accounting process follows eight – steps in completing the bookkeeping tasks of the company. It gives a clear guideline for recording, analyzing, and reporting the final company's financial activities (Horngren et al., 2012). The eight steps include the following Step 1: Transactions identification The first step in the accounting cycle involves the company identifying its transactions and recording them properly in the book. Example Spire Receives 1200 Pounds cash from the client for providing treatment services. Step 2: Journal entry The step involves entering each transaction identified in the journal. The company utilizes accrual accounting in this step. Example The company debited cash account by 1200 pounds and credited revenue by 1200 pounds

7 REFERENCE DATE Account DEBIT CREDIT 122 12/31/2021 cash 1200 Revenue 1200 Step3: Posting The transaction is posted in the general ledger at this step. Example Based on the above information, the general ledger will look like CASH Ref date Epln DEBIT CREDIT 12 2 December, 31 ST Received payment for treatment 1200 pounds REVENUE FOR SERVICE Ref date Epln DEBIT CREDIT

8 122 December, 31 ST Received payment for treatment 1200 pounds Step4: Unadjusted Trial Balance A trial balance is prepared in this step to show the company its unadjusted ratios in every single account. Example Debit (pounds) Credit (Pounds) cash 1200 Treatment Revenue 1200 Bal 1200 1200 Step 5: Worksheet

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9 The fifth step involves worksheet analysis and identifying the adjusting entries. Errors are determined once the expense and revenue do not match. Example If the debit side amounts to 20,000 pounds and the credit side amounts to 15,000 pounds, then the bookkeeper must correct 5,000 pounds. Step 6: Adjusting Journal entries The sixth step involves the bookkeeper recording journal entries of the adjustments where required. Example The depreciation value of an Anesthesia machine is separated over many accounting periods depending on its lifespan. The depreciation value of 100 pounds is adjusted in the journal entry. Step 7: Financial Statements The company generates its financial information: balance sheet, statement of income, and cash flow statement. Example

10 The total revenue generated by Spire Healthcare in 2021 is £ 1,106.2 million, and total expenses are £ 509.73 million. Net income =Revenue – Expenses= £596.27 million. (The income statement for 12/31/2021). The balance sheet shows equity, liabilities, and assets, while cash flow presents the cash inflows and outflows of the company. Step 8: Book Closing The Group completes its books at the end of the specified date, and the closing statement provides a performance analysis report of the company over the period. Example The company has 100,000 drawings, a capital of 500,000 pounds, and a net income of 596.27 million pounds. The closing entries will appear as follows Date Account Debit (Pounds) Credit (Pounds) 122 December 31, 2021 Net income 596.27 million Capital for owner 596.27 million 123 December 31, 2021 capital 500, 000 Drawings by Owner 500, 000

11 After summarizing the financial information, the results are analyzed and communicated to the company's stakeholders. Positive results imply that the company is making profits and hence continue to operate and even decide on expansion. Conclusion Accounting and Double entry concepts play a crucial role in any business. For instance, Spire healthcare applies accounting principles and processes in its operation, enabling it to be the outstanding private healthcare provider in the UK and other parts of the World. Accounting has to be followed by all businesses to ensure that the company provides consistent, material, and realistic financial information, which is essential in decision-making.

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12 Bibliography Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D., Tan, R. and Willett, R., 2012. Accounting . Pearson Higher Education AU. https://books.google.com/books? hl=en&lr=&id=MyriBAAAQBAJ&oi=fnd&pg=PP1&dq=accounting&ots=exhzyxDplF&sig=jDafgLsVpl kMqqzcypzVUqHRas4 Powell, S. (2022) Accounting , Corporate Finance Institute . Available at: https://corporatefinanceinstitute.com/resources/accounting/accounting/ #:~:text=Accounting%20is%20important%20as%20it,over%20a%20period%20of %20time. (Accessed: December 11, 2022). Spire Healthcare (2022) Wikipedia . Wikimedia Foundation. Available at: https://en.wikipedia.org/w/index.php?title=Spire_Healthcare&oldid=1122806102 (Accessed: December 10, 2022).

13 Spire Healthcare Financial Statement (2022) Spire Healthcare . Spire Healthcare. Available at: https://investors.spirehealthcare.com/investors/annual-report-2021/ (Accessed: December 10, 2022). The Basic Accounting Principles and guidelines (n.d) FutureLearn . Available at: https://www.futurelearn.com/info/courses/introduction-to-financial-accounting- organizations-decisions-through-numbers/0/steps/68580 (Accessed: December 11, 2022). Weygandt, J.J., Kieso, D.E., Kimmel, P.D., Trenholm, B., Warren, V. and Novak, L., 2019. Accounting Principles, Volume 2 . John Wiley & Sons. https://books.google.com/books? hl=en&lr=&id=p6yXDwAAQBAJ&oi=fnd&pg=PA1&dq=Accounting+principles&ots=NthQJ1AHc8&si g=S0_an8l-Q7ZGl39VM4cLY-bWGjo