Accounting terms ppt

basic accounting terms ppt and basic accounting terms and concepts ppt
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Dr.DinoHardy,United Arab Emirates,Teacher
Published Date:25-07-2017
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CPT Section A - Fundamentals of Accountancy Chapter 2 Unit 1 FCA SK Chhabra •Means the amount which the owners has invested in the firm or can claim from the firm. •For the firm, it is liability towards the owner because the owner is treated to be separate from the business. Capital •It is also know as Owner’s Equity and net worth. •Liabilities mean the amount which the firm owes to outsiders, that is excepting the proprietors Liabilities OR Long –term Current Liabilities Liabilities These are those These are those liabilities which are liabilities which are payable after a long payable in near future term, (generally more (Generally within one than one year). year). For example For example long creditors, bank term loans, overdraft, bills debentures, etc. payable, short term loans, etc. •Assets are things of value owned by the business. •Anything which will enable the firm to get cash or a benefit in future, is an asset. Assets •For example stock of goods, cash, furniture, machines, building, etc. •Person who owes money to the firm generally on account of credit sale of goods is called a debtors. He is called a debtor because he owes the amount to the firm Debtors Fixed Current Assets Assets Are those assets which Are those assets of the are purchased for the business which are kept purpose of operating the for short term for business to earn revenue converting into cash or and not for resale for resale. Examples land, Example Unsold building, machinery, goods, debtors, bills furniture, motor car receivables, bank etc. balance, etc.. •The term ‘stock’ includes goods lying unsold on a particular date. •Stock is valued on the basis of “ cost or net realisable value Stock whichever is less” •The term receivables is used for the amount that is receivable by the business from others Receivables •A person from whom goods are purchased on credit. For example, Mohan is creditor of the firm when goods are Creditors purchased on credit from him. •The term payable is used for the amount payable by the firm to the outsiders Payables • Loss means something against which the firm receives no benefit. •It may be noted that expenses lead to revenue but losses do Losses not, such as theft, bad debt etc •The person who makes the investment and bears all the risks connected with the business is called the Proprietor proprietor •It is the amount of money or the value of goods which the proprietor takes for his domestic or personal use Drawings •Means amount receivable by the business from sale of goods, services, interest received, rent received, Revenue miscellaneous receipts etc due to business •An expense is the amount spent in order to produce and sell the goods and services which produce the revenue. It is the cost of the use of things of services for the purpose of generating revenue Expenses • Examples are payments of salaries, wages, rent, etc. •It is the difference between revenue and expense •For example, goods costing Rs. 15,000 are sold for Rs. 21,000, the cost of goods sold, i.e., Rs. 15,000 is expense, the sale of goods, i.e., Rs. 21,000 is revenue and the difference, i.e., Rs. Income 6,000 is income. •It is a term used to describe profit of an irregular nature, e.g., capital gains. Gain •The term purchases is used only for the purchase of goods. Goods are those things which are purchased for resale or for producing the finished products which also are meant to be sold. •Goods purchased for cash are called cash purchases but if goods Purchases are purchased on credit, it is referred to as credit purchases. •The term ‘sale’ refers to the amount for which the goods are sold or services are rendered/given. Sales •The sales may be for cash or on credit. • Gross profit is the difference between sales revenue or the proceeds of goods sold and/or services rendered over its Gross Profit direct cost •Net Profit is the profit made after allowing for all expenses. In case, expenses are more than the revenue, it is Net Loss Net Profit • Cost of goods sold is the direct costs of the goods or services sold Cost of Goods Sold • Is prepared by seller when the goods are sold against cash • It has details with respect to description of goods sold, quantity, Cash rate of each item and the total amount received, date etc Memo • Is prepared by the seller when the goods are sold on credit. • It is has details with respect to the name of the party to whom Invoice/ goods are sold, the description of the goods sold Bill • Pay – in –slip is a form available from a bank for depositing money in a bank account. It has a counterfoil which is returned to the depositor with signature of cashier, as Pay in slip receipt • Is a document evidence of some business transaction. Such evidence are source documents, i.e., Cash Memo, Invoice or Bill, Receipt, Pay – in – Slip, etc Voucher Tangible assets Intangible assets •Are those assets which •Are those assets which can be seen and felt cannot be seen or felt, like buildings, like the goodwill of a machinery, stock, cash, firm or the know – how furniture, etc which it possesses Modern Traditional Approach Approach Assets/Expenses Debit for Credit for Increase Decrease Liabilities/Revenue/Capital Debit for Credit for Decrease Increase Under Traditional Approach accounts can be classified under Personal Accounts • These accounts relate to persons like debtors or creditors. Example Ram and Co. a credit supplier of goods Real Accounts • These accounts relate to assets of the firm and include both tangible and intangible assets like Land, Buildings, cash, patents, copyrights etc Nominal Accounts • These accounts relate to income, expense, gains and losses Example Interest paid account, commission received account etc

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