Comparative study.
Sale of business.
Creditors:-
Drawings:-
It is the amount of money or the value of goods
which the proprietor takes for his domestic or personal use.
Revenue:-
It means the amount which, as a result of
operations, is added to the capital. “Revenue is an inflow of
assets which results in an increase in owner’s equity. E.g.
sale of goods, rent income.
Expense:-
It is the amount spent in order to produce and sell the
goods and services which produce the revenue. “Expenses is
the cost of the use of things or services for the purpose of
generating revenue”. E.g. payment of salary, wages, rent,
etc.
Income:-
It is the profit earned during a period of time. In
other words, the difference between revenue and expense is
called income.
Gross Profit:-
Gross profit is the difference between sales
revenue or the proceeds of goods sold and services rendered
over its direct cost.
Net Profit:-
Net Profit is the profit made after allowing for all
expenses. In case, expenses are more than revenue, it is Net
Loss.
Gain:-
Credit Transaction:-
Transactions in which the
receipt/payment of cash is postponed to a future date is
called as a credit transaction.
Net worth:-
It means assets minus outside liabilities.
Profits of a business increase net worth where as
losses reduce the net worth of a business.
Turn over:-
It means total trading income from cash sales and
credit sales.
Voucher:-
Any written document in support of a business
transaction is called a voucher. It is an objective evidence in
support of a transaction.
Basis of Accounting
a) Cash Basis
1) Personal Account:-
These accounts record a business dealings with
persons or firm.
Nominal Account
Credit Incomes & Gains
Advantages of Double Entry System
a) Recording:-
b) Classifying:-
Credit
nDecrease in asset accounts
tDecrease in expense accounts
nIncrease in liability accounts
iIncrease in equity accounts
tIncrease in revenue accounts
LEDGER
The two sides of the trial balance will not tally if a mistakes
has taken place in the following.
a) Posting
b) Totaling
c) Balancing.
Nature of Balances:
i) All assets accounts & also dues from persons will show
debit balances.
a) Check the cash balance in the cash book against the actual
cash in hand.
1) Errors of omission: