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Some notes on accounts:

Accounting was first started in Babylonia and Egypt around 4000 B.C, they recorded transactions of payment of wages and taxeson clay tables and reported to their wazirs ( ;) that time prime ministers). Thats how all this Book keeping has come into picture.

Luca Pacioli (French) is the first person to introduce double entry. He got the terms Debit and Credit Double entry is nothing but, if you record credit somewhere then you must record debit elsewhere. i.e is credit happening at A is because Debit happening in B.

Branches of accounting 1) Financial accounting: The purpose of this branch of accounting is to keep a record of all financial transactions so that: a) The profit or loss can of a business during an accounting period can be measured. b) The financial position of the business as at the end of the accounting period can be ascertained. c) The financial information required by the management and other interested parties can be provided. 2) Cost accounting: The purpose of cost accounting is to analyze the expenditure so as to ascertain the cost of various products manufactured by the firm and fix the prices. It also helps in controlling the costs and providing necessary costing information to management for decision making. 3) Management accounting: The purpose of mgmt acct is to assist the mgmt in taking rational policy decision and to evaluate the impact of its decisions and actions.

Debit: means owed to the proprietor. Credit: means gain from a proprietor. Basic terms in accounting 1) Entity: entity means a thing has a definite individual existence. Business entity means a specifically identifiable business enterprise like super bazaar, Hire jewelers, ITC limited etc, an accounting system is always devised for a specific business entity (also called accounting entry).

2) Transaction: A event involving some value between 2 or more entities. It can be a purchase of goods, receipt of money, payment to a creditor, incurring expenses etc; it can be a cash transaction or a credit transaction. 3) Assets: Assets are items of value used by the business in its operations e.g. Super market owns a fleet of trucks, which is used for delivery of goods, here company gets economic benefit of using the trucks for transport. Assets are of 2 types a) fixed and current. Fixed assets are assets held on a long term basis such as land, buildings, machinery, plant, furniture etc, These assets are used for the normal operations of the business. Current assets are assets held on a short-term basis such as debtors(accounts receivable), bills receivables), stock (inventory), temporary marketable securities, cash and bank balances.

4) Financial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e. retail, corporate, investment banking, etc.
5) Liabilities: liabilities are obligations or debts that an enterprise has to pay at some time in the future. 6) Capital: Amount invested by the owner in the firm is known as capital. It can be in form of cash or assets by the owner. Therefore sown as capital on the liabilities side o the balance sheet. 7) Sales: Sales are total revenues from goods or services sold or provided to customers. Sales may be cash sales or credit sales. 8) Revenues: Revenue is also called income. These are the amounts of the business earned by selling its products or providing services to customer. Other items of revenue: commission, interests, dividends, royalties, rent received, etc. 9) Expense: costs incurred by a business in the process of earning revenue are known as expense. 10) Expenditure: Spending money or incurring a liability for some benefit, service or property received is called expenditure. Payment of rent, salary, purchase of goods, machinery, etc etc. 11) Profit: The excess of revenues of a period over its related expenses during an accounting year is profit. It increases the investment of the owner in his business. 12) Gain: A profit that arises from events or transactions which are incidental to business such as sale of fixed assets, winning a court case. 13) Loss: It refers to money or moneys worth lost without receiving any benefit in return. 14) Discount: Discount is deduction in the price of goods sold. It is offered in 2 ways: offering deduction of agreed percentage of list price at the time selling goods is one way of giving discount this is called trade discount. Generally given by manufacturers to whole sellers and by whole sellers to retailers. The other is cash discount: this is deduction in amount due in case if they pay the amount within a period or earlier. This deduction is given at the time of payment on the amount payable. 15) Drawings: Withdrawal of money and goods/or goods by the owner from the business for personal use is known as drawings, it reduces the investment of the owners.

16) Purchase: Purchase are total amount of goods procured by a business on credit and on cash, for use or sale. Purchase can be cash purchase or credit purchase. 17) Debtor: Debtors are person and / or other entities who owe to an enterprise an amount for buying goods and services on credit. 18) Creditors: Creditors are people and/ or other entities who have to be paid by an enterprise an amount for providing the enterprise goods and services on credit.