Al-Samnan Academy Of Commerce And Science

INTERRODUCTION OF BUSINESS
Accounting: Accounting is a process of recording, classifying, summarizing and interpreting the financial data under double entry system. Transaction: Any dealing between two persons of goods and services. Proprietor: The person who invest the money to start the business. Capital: The money invested by the owner to start the business. Purchase: Goods bought for resale purpose to earn profit. Drawings: Any type of cash or goods taken away by the owner for his personal use. Purchase Return: Goods return to the supplier due to some reason. Cash Purchase: Goods purchased on the cash basis. Credit Purchases: Goods purchased and the payment is made in certain future time. Sales: Goods sold for the purpose to earn profit. Sales Return: Goods returned by the customer due to some reason. Cash Sales: Goods are sold and cash is received immediately. Credit Sales: Goods are sold are payment is made in certain future time by the customer. Debtor: A person who owes the money to another. Creditor: A person who pays out something or to whom the money owing. Expenses: The expenditures who give us purchased for short time. E.g. Salary, wages. Expenditure: Expenditure takes place when we purchased an asset. Asset: Those expenditures who gives us benefit for long time. E.g. Furniture, Cash, Building etc. Liabilities: All the responsibilities or debts on the business. Owners Equity: The liabilities of the owner on the business. Stock: Goods left at the end of the year unsold. Income: All the profit earned by the business.

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Al-Samnan Academy Of Commerce And Science

Trade Discount: The discount which is given by the seller to the buyer on the list price due to any reason is called Trade Discount. Cash discount: The discount which is given by the creditor to the debtor, if he paid the amount before the due date is called Cash Discount. Entry: Recording of transactions called entry. Double entry system: There are two aspects of each entry. One is debit and other is credit. Book keeping: It is an art of recording monetary transaction in the book of account properly. Object of book keeping: It provides a permanent and systematic record. Reason for trade discount: 1) When selling to a fellow trader. 2) When sales are made in bulk. Commission: It is a form of remuneration for services rending by one person to another. Account: An account is a separate record of asset, liability or capital, revenue and expense in a summarized manner. Personal account: Account which relates to a person or firm. Real and property account: Al those accounts which keep record of property or asset owned by the business. Nominal Account: Those account which keep record of expenses, gains and losses. Valuation account: Those accounts in which provision are recorded. Branches of accounting: 1) Financial accounting 2) Cost accounting 3) Management accounting System of accounting: 1) Cash system 2) Accrual system Cash system:

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Al-Samnan Academy Of Commerce And Science

It is system in which entries are made when cash is received. Accrual system: It is a system in which entries are made on the basis of amount having become due. What is concept in accounting? Concept includes those basic assumptions upon which accounting are used. Business entity concept: Business treated as separate entity from its owners. Moneyy measurement concept: Accounting records only those transactions which can expressed in terms of money. Cost concept: Assets are always recorded on their cost price. Going concern concept: It is assumed that the business will exits for a long time. Realization concept: Provided for all losses but anticipate no profit. Convention: Guiding rules are customs for preparing account.

Journal
Journal: A book of account in which entries are recorded at daily basis in a chronological order is called Journal. Narration: A brief explanation under each entry is called Narration. Journalizing: The act of recording entries in journal is called Journalizing. Day book: Because entries are recorded on the same day it takes place. Compound Entry: The entry in which more than one account is debited or credited is called Compound Entry. Ledger: Ledger is the king of all account book in which each account classified separately. Posting: The process of recording transactions from journal to ledger is called Posting. Folioing: When we post various entries from journal to ledger. we should write the ledger page I the L/F of journal and page of J/F of the ledger. Zero balance: If the two sides of account are equal the account will show zero balance. Balance: Balance means equality between the two sides of an account. Balancing: The process of equalizing the two sides of account is called Balancing. Closing balance: At the time of balancing debit balance is placed on the credit side and credit balance is placed on the debit side.

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Al-Samnan Academy Of Commerce And Science

Trial Balance:
Trial balance: A book of account in which we summarized the balances of each and every account shown in ledger.

Bills of exchange:
Bills of exchange: It is instrument in writing, containing ,an unconditional order signed by maker, directing a certain person to pay certain sum of money only to or to order of a certain person or to the bearer of the instrument. Drawer: The person who draws the bills is called Drawer. Drawee: The person to whom the money is payable is called Drawee. Payee: The person who receives the money of the bill of exchange is called Payee. Day of grace: The three extra days given to the drawer for the payment of bills is called Days of Grace. Bill receivable: From the point of view of the drawer the bill is receivable. Bill payable: From the point of view of a drawer the bill is payable because the money is payable. Dishonoring of bill: When the drawer is refused to pay the amount of bill at maturity. Endorsement of bill: The transfer of bills from one person to another for the settlement of debts. Noting charges: The notary public charge a small fee to registered the dishonoring of bills. Retiring of bill: It means making payment before the maturity on some discussed.

Sub-division of Journal
Bank reconciliation statement: It is a statement which is made to reconcile the effected balances of cash book and pass book. Subsidiary book: Journal is sub-divided into different journals known a subsidiary book. Cash book: Cash book is the sub-divided books of journal recording transactions relating to receipts and payment of cash. Voucher: A written evidence of payment or receipt of cash. Single column: In which record of only in cash and receipts or payment is made. Double column:

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Al-Samnan Academy Of Commerce And Science

In which cash book and book transaction involving receipts and payment are recorded. Triple column: In which three columns on each side is made one for cash second for bank and third for discount received or allowed. Contra entry: The entry which is recorded on the both sides of cash book. Pass book: The book in which a banker records transactions relating to a person.

Capital and Revenue

Capital expenditure: An expenditure which result in the acquisition of fixed assets. Revenue expenditure: All expenditures which are incurred in the day of day business. Revenue receipt: Those receipts which are available for meeting day to day experience of business. Capital receipts: Whose benefit is enjoyed over a long period.

Rectification of Error
Error kinds: (i) Book keeping Error. (ii) Trial balance Error. Book keeping Error: Those errors which may be made in the original book of entry. Trial balance Error: Those errors which may be made in the preparation of trial balance. Suspense account: It is an account in which we entered those transactions which have not placed in their proper account. Error of omission: In which the transactions has been totally omitted. Error of principle: Error which are arise due to ignorance of accounting principle.

Final accounts
Final accounts: It means the statement which are finally prepared to show the profit and loss and financed state of a business. Trading account: It is the account which is prepared to determine the gross profit or loss. Direct expense: Expanses directly connected with the manufacturing or purchase of goods. Indirect expense:

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Al-Samnan Academy Of Commerce And Science

All those expenses which are not directly connected with the purchase or manufacturing of goods is called indirect expenses. Gross profit: .The amount obtained by the difference between cost sold goods and net sales :Profit and loss account .The account which is prepared to calculate the net profit and loss of the business :Net profit .The amount obtained by the deducting all expenses from the gross profit :Closing entries .The journal entry made for the purpose of closing the temporary accounts :Balance sheet .It is a statement of assets and liabilities which shows it financial worth :Fixed assets .Assets which have long life and use for long period of time :Tangible assets .Assets which have physical existence and which can be seen and touched :Intangible assets .Assets which have not physicals existence and which can not seen and touched :Current assets .Assets which can converted into cash with a year :Quick assets .Out of current assets the assets which are converted into cash quickly :Dock charges The dues imposed on ships and which are converted into their charges is called .dock charges :Outstanding liability .Outstanding expenses and unearned income is called Outstanding liability :Invoice .Document given by the seller to buyer for credit sales of goods is called Invoice :Freight .The transport charges which paid by the business on transportation :Salary A fixed remuneration for services performed by one person to another for a fixed .period is called salary :Wages A remuneration which is normally paid on the basis of work performed by one .person to another is called wages :Debit notes . Which goods are returned or an allowance is claim from the supplier :Credit notes When goods are returned by the customer are accepted q document is issued to .acknowledge the allowance from the such document is called credit notes :Cheque An unconditioned order in writing drawn by customer on his bank requesting it to pay on demand a certain sum of money only to a person named in it or bearer .of the Cheque is called Cheque :Bank draft

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Al-Samnan Academy Of Commerce And Science

A written order of a bank to a person (normally its own b y bank) to pay a .certain sum of money to a person in whose flavor the draft ahs been issued :Insolvency .Liability of a person exceed from his assets :Liquid assets Those assets which are in the form of cash and can be converted into cash .quickly

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