FOUNDATION STAGE:
BUSINESS:
"Any legal activity undertaken for the sake of earning profit is called business."
(i)
(ii)
(iii)
Manufacturing Business.
Trading Business.
Business of Providing Services.
TRANSACTION:
Any business deal between two or more persons (including owner,
employee, supplier, etc.) which is measureable in term of money and
involved an exchange is called transaction.
Exchange means give and take
it may be exchange of goods
Example:
goods sold, purchased, etc.
Or services.
Example:
Doctors, lawyers, professors, carpenters etc. sells their services. To
identify whether a deal is a transaction or not one must see that both
the conditions are being fulfilled.
1
2
Cash Transaction
When cash is immediately paid or receipt of cash on spot for executing a deal.
Credit Transaction
If the payment or receipt of cash is postponed for some future period is
known as credit transaction.
Examples:
Purchased goods from X Rs. 100/=
Sold goods on account to A
amounting Rs. 800/= Bought
furniture on credit Rs.
3000/=
PURCHASES:
Assets=equities
GOODS OR MERCHANDISE
The things which are manufactured for selling purpose or bought for reselling
purpose are known as goods or merchandise.
Example:
a. Cloth is goods or merchandise for a cloth dealer.
b. Cement is goods or merchandise for a cement dealer.
DEBTORS/ACCOUNTS RECEIVALBES
The persons to whom the goods have been sold on credit and from
whom the amount is receivable are called "Debtors". Debtors are
also termed as Accounts Receivable. (grouped under assets)
Example:
Ali Sold goods to Imran on credit for Rs. 500, Imran are a Debtor of Ali.
When name is not mentioned use word debtors or accounts
receivable in place of imran to pass journal entry.
CREDITORS
The persons from whom the goods are purchased on credit
And to whom the amount is payable are called creditors. Creditors
are also termed as Accounts Payable. (grouped under liabilities)
Example:
All Sold goods to Imran on credit for Rs. 500, Ali is a Creditor of Imran
When name is not mentioned use word creditor or accounts payable in place of
imran to pass journal entry.
Example:
a. Stationery is purchased by a stationer is called "Purchases"
b. Cloth purchased by a cloth merchant is called "Purchases"
c. Cement purchased by a cement dealer is called "Purchases"
COMMISSION
It is reward of service given by one to another person/business.
When paid becomes expense when received becomes income
Example:
Amount paid to a commission agent.
EXPENSE
Amount spent to get short term benefit.
Example:
Salaries, Rent, Stationery etc.
Or expired portion of cost (depreciation)
ACCOUNT / LEDGER
A summarized record of all transactions relating to a particular
person or thing is called an account. Or separate record of each
asset, liability, income, expense, or owner equity.
Example:
Building Account, Plant Account, Salaries Account, Rent Account
Capital Account etc.
STOCK OR INVENTORY
The goods which remain unsold at the end of a day, month or year
are called stock. It may also be termed as stock-in trade or
inventory.
Group (assets)
Additional
BUSINESS:
"Any legal activity undertaken for the sake of earning profit is called business."
(i)
(ii)
(iii)
Manufacturing Business.
Trading Business.
Business of Providing Services.
BANKING TRANSACTIONS: