Accounting Conventions:
The term 'conventions' includes those customs or traditions which guide the accountant while ommunicating the accounting information. The following are the important accounting conventions:
(i) Convention of conservatism (ii) Convention of full disclosure
(Hi) Convention of consistency (iv) Convention of materiality.
ACCOUNTING CONCEPTS
Separate Entity Concept:
Accounts are kept for entities, as distinguished from the persons who are associated with these ties. In recording events in accounting, the important question is: "How do these events affect the iy?" How they affect the persons who own, operate, or otherwise are associated with the entity is relevant. For example, when a person invests Rs. 200,000 into business it will be deemed that the owner has given that money to the business which will be shown as a 'liability' in the books of the business. In ok the owner withdraws Rs, 30,000 from the business, it will change the position and the net amount :jtyable by the business to the owner will be shown only as Rs. 170,000.
The concept of separate entity is applicable to all forms of business organizations. For example, in of a sole proprietorship or partnership business, though the, sole proprietor or partners are not as separate entities in the eyes of law, but for accounting purposes they will be considered as •qptrate entities.
Going Concern Concept:
According to this concept it is assumed that an entity is a going concern — that it will continue to aerate for an indefinite time period there is no intention to liquidate the particular business venture in the fcreseeable future. On account of this concept, the accountant while valuing the asset does not take into jcxHint the sale value of assets. Moreover, he charges depreciation on fixed assets on the basis of their
life rather than on their market values.
For example, suppose that a company has just purchased a three-year insurance policy for ^.-15000. If we assume that the business will continue in operation for three years or more. We will outsider the Rs.45000 cost of insurance as an asset which provides services to the business over a three-jar period. On the other hand, if we assume that the business is likely to terminate in the near future, the •surance poricy should be reported at its cancellation value i.e. the amount refundable upon cancellation.
Moreover, the concept applies to the business as a whole. When an enterprise liquidates a branch segment of its operations, the ability of the enterprise to continue as a going-concern is not impaired jaBnnally. The' enterprise wilVnot be considered as a going-concern when it has gone into liquidation.
Money Measurement Concept:
In financial accounting, a record is made only of those information that can be expressed in »:neiary terms. In other words, no accounting is possible for an event or transaction which is not j Measurable in terms of money, e.g. passing an examination, delivering lecture in a meeting, winning a prize sl These are events no doubt, but since these are not measurable in terms of money, there is no question of accounting.
Measurement of business events in money helps in understanding the state of affairs of business in ;h better way. For example. If a business owns, 1 500 kg of stock, one car, 1 500 square feet of building etc. these amounts cannot be added to produce a meaningful total of what the business owns. :ver, if a these items are expressed in monetary terms such as stock Rs.24000, car Rs. 300,000 and ig Rs. 500,000, all such items can be added in better way and precise estimate about the assets of ss will be available.
Tuesday, October 27, 2009
Problem with Solution and accounting concepts
For example, we sold goods to a customer for Rs. 1000 and he paid cash to us Rs. 1000 revenue will be equal to inflow of cash Rs. 1000. But if the customer has paid only Rs. 500 a remaining amounts he agreed to pay at some future date, again in that case the revenue will be eqi Rs. 1000 (inflow of cash Rs. 500 + Rs. 500 receivable).
TYPES OF REVENUE:
1. Sales: The_total price of goods sold
2. Interest earned
3. Fees earned
4. Rent earned
5. Commission earned
22. EXPENSES:
Expenses are the costs of the goods and services used up in the process of obtaining revenue.
Or Expenses are the cost of producing revenue in a particular accounting period.
Or
An expense is a sacrifice, or cost incurred to generate revenue.
For example, salaries for employees, telephone charges, rent of the building, insurance transportation etc. AH these costs are necessary to attract and serve the customers and thereby to ob^ revenue. Expenses are sometimes also referred to as the "cost of doing business" or "expired costs".
23. NET INCOME OR NET PROFIT:
Net income or net profit is simply the amount by which the "revenue" for a particular period time exceed the "expenses" incurred to generate them.
Net income or net profit = Revenue- Expenses:
ACCOUNTING PRINCIPLES
It has already been stated in this chapter that Accounting is the language of business threw which economic information is communicated to all the parties concerned. In order to make this langu easily understandable all over the world, it is necessary to frame or make certain uniform standards wri are acceptable universally. These standards are termed as "Accounting Principles".
Accounting principles may be defined as those rules of action or conduct which are adopted by accounts universally while recording accounting transactions. They are a body of doctrines commc associated with the theory and procedures of accounting. They are serving as an explanation of cun practices and as a guide for selection of conventions or procedures where alterhatives exist. Tl principles can be classified into two groups. .
(i) Accounting concepts (ii) Accounting conventions.
Accounting Concepts:
Going concern concept Cost concept
Accounting period concept Realisation concept.
The term 'concepts' includes those basic assumptions or conditions on which the scienc accounting is based. The following are the important accounting concepts:
(i) Separate Entity Concept (ii)
(iii) Money measurement concept (iv)
(v) Dual Aspect concept (vi)
(vii> Matching concept
TYPES OF REVENUE:
1. Sales: The_total price of goods sold
2. Interest earned
3. Fees earned
4. Rent earned
5. Commission earned
22. EXPENSES:
Expenses are the costs of the goods and services used up in the process of obtaining revenue.
Or Expenses are the cost of producing revenue in a particular accounting period.
Or
An expense is a sacrifice, or cost incurred to generate revenue.
For example, salaries for employees, telephone charges, rent of the building, insurance transportation etc. AH these costs are necessary to attract and serve the customers and thereby to ob^ revenue. Expenses are sometimes also referred to as the "cost of doing business" or "expired costs".
23. NET INCOME OR NET PROFIT:
Net income or net profit is simply the amount by which the "revenue" for a particular period time exceed the "expenses" incurred to generate them.
Net income or net profit = Revenue- Expenses:
ACCOUNTING PRINCIPLES
It has already been stated in this chapter that Accounting is the language of business threw which economic information is communicated to all the parties concerned. In order to make this langu easily understandable all over the world, it is necessary to frame or make certain uniform standards wri are acceptable universally. These standards are termed as "Accounting Principles".
Accounting principles may be defined as those rules of action or conduct which are adopted by accounts universally while recording accounting transactions. They are a body of doctrines commc associated with the theory and procedures of accounting. They are serving as an explanation of cun practices and as a guide for selection of conventions or procedures where alterhatives exist. Tl principles can be classified into two groups. .
(i) Accounting concepts (ii) Accounting conventions.
Accounting Concepts:
Going concern concept Cost concept
Accounting period concept Realisation concept.
The term 'concepts' includes those basic assumptions or conditions on which the scienc accounting is based. The following are the important accounting concepts:
(i) Separate Entity Concept (ii)
(iii) Money measurement concept (iv)
(v) Dual Aspect concept (vi)
(vii> Matching concept
Accounts Details 2010
DEBTORS OR ACCOUNTS RECEIVABLE:
When goods are sold to the customers on credit basis (credit sales are made to customers), debtors come into existence. Debtors are the persons or customers to whom goods have been sold on credit basis and from whom the business is to receive money in near future. The accounts of such customers are known as "Accounts Receivable". For example, we sold goods to A for Rs. 3000, to B for Rs. 2000 and to C for Rs. 4000 on credit basis. The amount receivable from them (A, B and C) is known as "Debts" and the three customers, A, B and C are our debtors or accounts receivable.
15. CREDITORS OR ACCOUNTS PAYABLE:
When goods are purchased from the suppliers (sellers) on credit basis, creditors come into existence. Creditors are the persons or suppliers from whom goods have been purchased on credit basis and to whom me money is to be paid in near future. The accounts of such persons (suppliers) are known as accounts payable". Accounts payable means, the amount which a business expects to pay to its suppliers for goods purchased or services received from them on credit basis.
The person or business who will receive the money - Creditor. The person or business who will pay the money -- Debtor.
16. CASH DISCOUNT:
It is a deduction or allowance given by a creditor to a debtor if the amount due is paid by the debtor before the due date, or it is a reduction in price (usually 2% or less) offered by manufacturers or wholesalers (creditors) to encourage customers (debtors) to pay their debts within a specified discounted period. For example, X sold goods to Y (a customer) for Rs. 1000 on credit basis. It means, X is creditor and Y is debtor. X offers an allowance of 2% to Y, if he will pay his debts within 15 days. It means, if Y pays his debts within 15 days, then he will pay only Rs. 980 (1000 - 20) to X. Such a discount is known as "Cash Discount".
17. CAPITAL OR OWNER'S EQUITY:
To understand, this term, recall that business is an entity (organisation) separate from its owner or owners. Equities mean tne sources eft \un6s provibeu to start or to operate a "business entity ~S; . question is: who provides funds to a business unit. Mainly there are two sources of funds:
(a) Funds supplied by the owner/owners.
(b) Funds supplied by the external parties like bank etc.
So, the amount of cash or goods invested (supplied) by the owner/owners in a unit is known as "capital" or owner's equity.
Or
Capital is the money or moneys worth borrowed by a business unit from its owver afl
owners.
Or
It is the claim or right of the owner/owners against the assets (properties etc. business) of the business.
Or It is the source of funds provided by the owner/owners of the business.
Or It is a part of the total equity which is supplied by the owner/owners.
When goods are sold to the customers on credit basis (credit sales are made to customers), debtors come into existence. Debtors are the persons or customers to whom goods have been sold on credit basis and from whom the business is to receive money in near future. The accounts of such customers are known as "Accounts Receivable". For example, we sold goods to A for Rs. 3000, to B for Rs. 2000 and to C for Rs. 4000 on credit basis. The amount receivable from them (A, B and C) is known as "Debts" and the three customers, A, B and C are our debtors or accounts receivable.
15. CREDITORS OR ACCOUNTS PAYABLE:
When goods are purchased from the suppliers (sellers) on credit basis, creditors come into existence. Creditors are the persons or suppliers from whom goods have been purchased on credit basis and to whom me money is to be paid in near future. The accounts of such persons (suppliers) are known as accounts payable". Accounts payable means, the amount which a business expects to pay to its suppliers for goods purchased or services received from them on credit basis.
The person or business who will receive the money - Creditor. The person or business who will pay the money -- Debtor.
16. CASH DISCOUNT:
It is a deduction or allowance given by a creditor to a debtor if the amount due is paid by the debtor before the due date, or it is a reduction in price (usually 2% or less) offered by manufacturers or wholesalers (creditors) to encourage customers (debtors) to pay their debts within a specified discounted period. For example, X sold goods to Y (a customer) for Rs. 1000 on credit basis. It means, X is creditor and Y is debtor. X offers an allowance of 2% to Y, if he will pay his debts within 15 days. It means, if Y pays his debts within 15 days, then he will pay only Rs. 980 (1000 - 20) to X. Such a discount is known as "Cash Discount".
17. CAPITAL OR OWNER'S EQUITY:
To understand, this term, recall that business is an entity (organisation) separate from its owner or owners. Equities mean tne sources eft \un6s provibeu to start or to operate a "business entity ~S; . question is: who provides funds to a business unit. Mainly there are two sources of funds:
(a) Funds supplied by the owner/owners.
(b) Funds supplied by the external parties like bank etc.
So, the amount of cash or goods invested (supplied) by the owner/owners in a unit is known as "capital" or owner's equity.
Or
Capital is the money or moneys worth borrowed by a business unit from its owver afl
owners.
Or
It is the claim or right of the owner/owners against the assets (properties etc. business) of the business.
Or It is the source of funds provided by the owner/owners of the business.
Or It is a part of the total equity which is supplied by the owner/owners.
Problem with Solution
For example, Mr. X started a business with Rs. 100000. Out of Rs. 100000, Rs. 70000 have been provided by the owner, X and Rs. 30,000 have been borrowed from a bank. Now, the equity (total funds) of the business is Rs. 100000 but owner's equity (capital) of the business is Rs, 70,000.
18. ASSETS:
Assets are the economic resources (having certain value) owned by a business on a particular date and which are expected to benefit the future operation of the business.
Or
Assets are the properties and possessions of a business both tangible (have physical existence) and intangible (have no physical existence).
Or
Assets are the things having certain value possessed by a business and receivable by a business on i particular date. For example, cash, furniture, building, land, machinery, stock of goods. Debtors or Accounts receivable, Bank balance, Goodwill etc.
19. LIABILITIES:
Liabilities are the debts or obligations of a business.
Or
The outsider's (creditors etc.) claims against the assets of the business are known as "Liabilities". There are two main parties who have claims, against the assets of a business; (a) Owner's claim; (b) Outsiders' claims. The owner's claim against the assets of a business is known as owner's equity and outsider's claims against the assets of the business are known as "liabilities."
Or
Liabilities mean the total amount which a business is legally bound to pay to the outsiders, e.g. ^editors, Bills payable, Accounts payable, Bank loan etc.
20. ACCOUNTING PERIOD:
It is a span of time for which a business generally prepares its financial statements (the statement prepared to know the profit or loss of a business and to Icnow its financial position). Mostly the financial reports are prepared for one year but they may also be prepared for one month or for one quarter.
21. REVENUE:
All business organisations are engaged in providing goods or services to their customers. The «nount which a business charges its customers for these goods or services, measures the revenue of the business.
• Or
It is the price of goods sold or services provided by a business to its customers.
Or
Revenue is the inflow of assets (cash or debtors) in return for services performed or goods delivered (sold) during an accounting period.
Chit is inflow of cash and debtors (receivable) in exchange for goods sold or services rendered during • accounting period.
18. ASSETS:
Assets are the economic resources (having certain value) owned by a business on a particular date and which are expected to benefit the future operation of the business.
Or
Assets are the properties and possessions of a business both tangible (have physical existence) and intangible (have no physical existence).
Or
Assets are the things having certain value possessed by a business and receivable by a business on i particular date. For example, cash, furniture, building, land, machinery, stock of goods. Debtors or Accounts receivable, Bank balance, Goodwill etc.
19. LIABILITIES:
Liabilities are the debts or obligations of a business.
Or
The outsider's (creditors etc.) claims against the assets of the business are known as "Liabilities". There are two main parties who have claims, against the assets of a business; (a) Owner's claim; (b) Outsiders' claims. The owner's claim against the assets of a business is known as owner's equity and outsider's claims against the assets of the business are known as "liabilities."
Or
Liabilities mean the total amount which a business is legally bound to pay to the outsiders, e.g. ^editors, Bills payable, Accounts payable, Bank loan etc.
20. ACCOUNTING PERIOD:
It is a span of time for which a business generally prepares its financial statements (the statement prepared to know the profit or loss of a business and to Icnow its financial position). Mostly the financial reports are prepared for one year but they may also be prepared for one month or for one quarter.
21. REVENUE:
All business organisations are engaged in providing goods or services to their customers. The «nount which a business charges its customers for these goods or services, measures the revenue of the business.
• Or
It is the price of goods sold or services provided by a business to its customers.
Or
Revenue is the inflow of assets (cash or debtors) in return for services performed or goods delivered (sold) during an accounting period.
Chit is inflow of cash and debtors (receivable) in exchange for goods sold or services rendered during • accounting period.
Definations 2010
Purchase Return
is known as "Purchases returns" or "Returns lo suppliers". For example, we purchased 100 radio sets (goods) from Lahore Electronics for Rs. 15000. On receiving the delivery of goods, it is found that 10 radio sets are of inferior quality. The return of these 10 radio sets to the seller (Lahore Electronics) will be a case of purchases returns.
7. PURCHASES DISCOUNT AND SALES DISCOUNT:
The Concession given by the supplier to the buyer on purchases of goods is known as "Purchases discount" to the buyer and "Sales discount" to the seller (supplier).
8. ALLOWANCES:
Sometimes, the customers (buyers) find that goods purchased have minor defects. In that case, the seller may agree to reduce the price of damaged or defective goods to induce the buyer to keep the goods. Such reduction in price is known as "Purchases allowance" to the buyer and "Sales allowance" to the seller.
9. SALES:
We know that goods are purchased for selling purposes. When these goods are sold to customers at a specific price, it is said that sales have been made. For example, we purchased goods worth Rs. 5000 (our purchases). Suppose, these goods have been sold at a price of Rs. 6000 — in accounting language it will be said that sales have been made at Rs. 6000. So goods sold are called "Sales".
10. CASH SALES:
If goods are sold to customers at a specific price and price of the goods is received from them at the time of sale of goods, such sales are known as "Cash sales". For example, we sold goods to a customer, Mr. A for Rs. 2000 on 10th January, 2005 and received the cash from him on the same date, it will be a case of cash sales.
11.
CREDIT SALES:
If goods are sold to a customer and he does not pay the price of goods at the same time but agrees to make payment on some future date, the sales are called "credit sales" or "Sales on account," For example, we sold goods to Mr. X for Rs. 3000 on 15th January, 2005 and he agreed to make payment on 31st January, 2005, it will be a case of credit sales or sales on account.
12. SALES RETURNS OR RETURNS INWARDS:
If a customer to whom goods have been sold finds that the goods are defective, unsatisfactory, below standard or not according to specification, he may return these goods to the seller. To the seller, such return of goods is known as "Sales returns" or "Returns Inwards" or "Returns from customers.
13. TRADE DISCOUNT:At the time of selling goods, the manufacturer or wholesaler allows retailers such a discount (concession). It is allowed at a certain percentage of the listed or catalogue price. For example, the list price of the goods is Rs. 30000, and the wholesaler allows a trade discount of 10% on the listed price to the retailer. It means the net price of the goods is 27000 (30000-3000). The trade discount enables the retailer to sell goods at the listed price; and the customer can be sure about the fair price of the goods. It may be noted that both the buyer and seller will record Rs. 27000 (not Rs. 30,000) in their books of account. In other words trade discount is not recorded in books of account. Thus, discount allowed by manufacturer or wholesaler at the time of selling goods to retailer as a deduction from the listed price or catalogue price, is called Trade Discount
is known as "Purchases returns" or "Returns lo suppliers". For example, we purchased 100 radio sets (goods) from Lahore Electronics for Rs. 15000. On receiving the delivery of goods, it is found that 10 radio sets are of inferior quality. The return of these 10 radio sets to the seller (Lahore Electronics) will be a case of purchases returns.
7. PURCHASES DISCOUNT AND SALES DISCOUNT:
The Concession given by the supplier to the buyer on purchases of goods is known as "Purchases discount" to the buyer and "Sales discount" to the seller (supplier).
8. ALLOWANCES:
Sometimes, the customers (buyers) find that goods purchased have minor defects. In that case, the seller may agree to reduce the price of damaged or defective goods to induce the buyer to keep the goods. Such reduction in price is known as "Purchases allowance" to the buyer and "Sales allowance" to the seller.
9. SALES:
We know that goods are purchased for selling purposes. When these goods are sold to customers at a specific price, it is said that sales have been made. For example, we purchased goods worth Rs. 5000 (our purchases). Suppose, these goods have been sold at a price of Rs. 6000 — in accounting language it will be said that sales have been made at Rs. 6000. So goods sold are called "Sales".
10. CASH SALES:
If goods are sold to customers at a specific price and price of the goods is received from them at the time of sale of goods, such sales are known as "Cash sales". For example, we sold goods to a customer, Mr. A for Rs. 2000 on 10th January, 2005 and received the cash from him on the same date, it will be a case of cash sales.
11.
CREDIT SALES:
If goods are sold to a customer and he does not pay the price of goods at the same time but agrees to make payment on some future date, the sales are called "credit sales" or "Sales on account," For example, we sold goods to Mr. X for Rs. 3000 on 15th January, 2005 and he agreed to make payment on 31st January, 2005, it will be a case of credit sales or sales on account.
12. SALES RETURNS OR RETURNS INWARDS:
If a customer to whom goods have been sold finds that the goods are defective, unsatisfactory, below standard or not according to specification, he may return these goods to the seller. To the seller, such return of goods is known as "Sales returns" or "Returns Inwards" or "Returns from customers.
13. TRADE DISCOUNT:At the time of selling goods, the manufacturer or wholesaler allows retailers such a discount (concession). It is allowed at a certain percentage of the listed or catalogue price. For example, the list price of the goods is Rs. 30000, and the wholesaler allows a trade discount of 10% on the listed price to the retailer. It means the net price of the goods is 27000 (30000-3000). The trade discount enables the retailer to sell goods at the listed price; and the customer can be sure about the fair price of the goods. It may be noted that both the buyer and seller will record Rs. 27000 (not Rs. 30,000) in their books of account. In other words trade discount is not recorded in books of account. Thus, discount allowed by manufacturer or wholesaler at the time of selling goods to retailer as a deduction from the listed price or catalogue price, is called Trade Discount
IMPORTANCE OF ACCOUNTING 2009
IMPORTANCE OF ACCOUNTING:
We live in a world where people need things from the day they are born to the day that they die.
imk of these 'needs' are physical needs, a need for goods of various sorts, food, clothing, shelter, and so Some of them are emotional 'wants', a need for education, entertainment, or recreation. In satisfying needs businessmen perform useful services to their fellow humans. In return they expect to earn noble reward for their efforts in the form of profits.
Cutyour coat according to your cloth".-- so goes the saying. Even a king becomes a pauper, if"
h feb to exercise economy in his expenditures. In other words, every individual will have to plan his according to his income. Obviously the question arises -- why is this planning necessary? The
of such planning arises as our wants or desires or needs for goods and services are unlimited, while cans, i.e. the income with which to buy such goods and services are limited. Where, however, goods services are available free of cost, i.e. gifts of nature, such as ajr, water (not in cities) etc., there is no of economy. But the necessity of economy is undeniable, where goods or services are not available fat of cost and their supply is limited. A proper and fair planning of expenditures helps us to ensure proper use of our income. Of course, s rue that the quantity of goods or money cannot be increased by making a proper planning. But crainh we can ensure most economic use of goods or money at our disposal.
Most of us do maintain some kind of a written record of our income and expenditure. The idea tetrad maintaining such record is to know the correct position regarding income and expenditure. The need r keeping a record of income and expenditure in a clear and systematic manner has given rise to the - jcct of 'book-keeping1. Some individuals do not recognise the necessity of keeping accounts of their day-to-day •peaditures, since they spend their own income and are not required to account for it to anybody else. But not an idea is wrong. A family, however, small it may be, must exercise proper control over its ipcnditures so as to ensure future security. A family has two-fold responsibilities - one is that of ensuring id welfare of the family and the other is the social responsibility. Needless to say, money is the most sentiat pre-request for ensuring peace and happiness of a family, which each and every member desires.The quantum of money must be adequate in relation to the needs. But mere adequacy of money will not do; cae has to take care of its proper utilization. For this it would be necessary to exercise economy and certain proper books of account. On the other hand each and every family must save a portion of its income for future contingencies. It is possible to increase the amount of saving through proper management nid effective control of the family expenses. Through such saving the family helps materialising theeconomic planning of the country.its totally
We live in a world where people need things from the day they are born to the day that they die.
imk of these 'needs' are physical needs, a need for goods of various sorts, food, clothing, shelter, and so Some of them are emotional 'wants', a need for education, entertainment, or recreation. In satisfying needs businessmen perform useful services to their fellow humans. In return they expect to earn noble reward for their efforts in the form of profits.
Cutyour coat according to your cloth".-- so goes the saying. Even a king becomes a pauper, if"
h feb to exercise economy in his expenditures. In other words, every individual will have to plan his according to his income. Obviously the question arises -- why is this planning necessary? The
of such planning arises as our wants or desires or needs for goods and services are unlimited, while cans, i.e. the income with which to buy such goods and services are limited. Where, however, goods services are available free of cost, i.e. gifts of nature, such as ajr, water (not in cities) etc., there is no of economy. But the necessity of economy is undeniable, where goods or services are not available fat of cost and their supply is limited. A proper and fair planning of expenditures helps us to ensure proper use of our income. Of course, s rue that the quantity of goods or money cannot be increased by making a proper planning. But crainh we can ensure most economic use of goods or money at our disposal.
Most of us do maintain some kind of a written record of our income and expenditure. The idea tetrad maintaining such record is to know the correct position regarding income and expenditure. The need r keeping a record of income and expenditure in a clear and systematic manner has given rise to the - jcct of 'book-keeping1. Some individuals do not recognise the necessity of keeping accounts of their day-to-day •peaditures, since they spend their own income and are not required to account for it to anybody else. But not an idea is wrong. A family, however, small it may be, must exercise proper control over its ipcnditures so as to ensure future security. A family has two-fold responsibilities - one is that of ensuring id welfare of the family and the other is the social responsibility. Needless to say, money is the most sentiat pre-request for ensuring peace and happiness of a family, which each and every member desires.The quantum of money must be adequate in relation to the needs. But mere adequacy of money will not do; cae has to take care of its proper utilization. For this it would be necessary to exercise economy and certain proper books of account. On the other hand each and every family must save a portion of its income for future contingencies. It is possible to increase the amount of saving through proper management nid effective control of the family expenses. Through such saving the family helps materialising theeconomic planning of the country.its totally
Monday, October 26, 2009
Accounting Definations
Partnership:
In a partnership, ownership is divided between two or more persons who agree to share t? property and skills to start and operate a business. Like the single proprietorship, a partnership busines simple to organise.
(c) Joint Stock Company:
A joint stock company is formed under the Companies Ordinance, 1984 and has the legal righ: act as a person. It may be owned by many people. A company has its own name, in which it can bu>. and sell property; make contracts; borrow money; and take court action. The persons who have m investment in the company are known as shareholders.
2. GOODS OR MERCHANDISE
In accounting the word "Goods" has a special meaning. It refers to something which has bi purchased by a trader for resale purposes or anything which has been manufactured for selling purpo* For example, if a trader purchases furniture for use in the business, it will not be regarded as "goods", bu it is purchased for resale, it will be regarded as "goods". The same article may be "goods" for one trader may not be so to another trader. For example, furniture is not "goods" for a book seller; but it will regarded as "goods" to a furniture -dealer.
Thus, cloth will be "goods" to a cloth dealer
Watches will be "goods" to a Watch dealer
Books will be "goods" to a Book - Seller
Stationery will be "goods" to a Stationery dealer. But watches, books or stationery will not be considered as "goods" to a cloth dealer.
3. PURCHASES:
In accounting language the word "Purchases" has a special meaning. When saleable gt ioil-bought in a business, it is said that "purchases" have been made. For example, to a cloth dealer, when cloth is purchased, it will not be necessary to mention that cloth has been purchased ( simply it will be s that purchases have been made. On the other hand, if stationery is purchased, then it will be essential mention that stationery has been purchased.
4. CASH PURCHASES:
If goods are purchased from a supplier and payment is made to him at the same time, purchases are known as "Cash Purchases". For example, Mr. X purchased goods from a seller, Mr. Y. Rs. 5000 on 1st January, 2005, and payment is made to the seller (Mr. Y) at the same date (1.1.2005), it i be a case of cash purchases.
5. CREDIT PURCHASES OR "PURCHASES ON ACCOUNT:
When goods are purchased from a seller and payment is not made to him at the same time, rat the payment is arranged to be made at some future date, such purchases are known as "credit purchases' "Purchases on account". For example, Mr. A purchased goods from Mr. B for Rs. 5000 on 1st Jam 2005 and Mr. A agreed to make the payment of goods on 15th January, 2005 (payment has not been on i.1.2005), it will be a case of credit purchases. On 15th January Mr. A will pay Rs. 5000 to Mr. B.
6. PURCHASES RETURNS OR RETURNS OUTWARDS:
Goods once purchased may subsequently be sent back to the seller for certain reasons, i.e. gc are defective, not according to specification, damaged or below standard. Such return of goods to the set
In a partnership, ownership is divided between two or more persons who agree to share t? property and skills to start and operate a business. Like the single proprietorship, a partnership busines simple to organise.
(c) Joint Stock Company:
A joint stock company is formed under the Companies Ordinance, 1984 and has the legal righ: act as a person. It may be owned by many people. A company has its own name, in which it can bu>. and sell property; make contracts; borrow money; and take court action. The persons who have m investment in the company are known as shareholders.
2. GOODS OR MERCHANDISE
In accounting the word "Goods" has a special meaning. It refers to something which has bi purchased by a trader for resale purposes or anything which has been manufactured for selling purpo* For example, if a trader purchases furniture for use in the business, it will not be regarded as "goods", bu it is purchased for resale, it will be regarded as "goods". The same article may be "goods" for one trader may not be so to another trader. For example, furniture is not "goods" for a book seller; but it will regarded as "goods" to a furniture -dealer.
Thus, cloth will be "goods" to a cloth dealer
Watches will be "goods" to a Watch dealer
Books will be "goods" to a Book - Seller
Stationery will be "goods" to a Stationery dealer. But watches, books or stationery will not be considered as "goods" to a cloth dealer.
3. PURCHASES:
In accounting language the word "Purchases" has a special meaning. When saleable gt ioil-bought in a business, it is said that "purchases" have been made. For example, to a cloth dealer, when cloth is purchased, it will not be necessary to mention that cloth has been purchased ( simply it will be s that purchases have been made. On the other hand, if stationery is purchased, then it will be essential mention that stationery has been purchased.
4. CASH PURCHASES:
If goods are purchased from a supplier and payment is made to him at the same time, purchases are known as "Cash Purchases". For example, Mr. X purchased goods from a seller, Mr. Y. Rs. 5000 on 1st January, 2005, and payment is made to the seller (Mr. Y) at the same date (1.1.2005), it i be a case of cash purchases.
5. CREDIT PURCHASES OR "PURCHASES ON ACCOUNT:
When goods are purchased from a seller and payment is not made to him at the same time, rat the payment is arranged to be made at some future date, such purchases are known as "credit purchases' "Purchases on account". For example, Mr. A purchased goods from Mr. B for Rs. 5000 on 1st Jam 2005 and Mr. A agreed to make the payment of goods on 15th January, 2005 (payment has not been on i.1.2005), it will be a case of credit purchases. On 15th January Mr. A will pay Rs. 5000 to Mr. B.
6. PURCHASES RETURNS OR RETURNS OUTWARDS:
Goods once purchased may subsequently be sent back to the seller for certain reasons, i.e. gc are defective, not according to specification, damaged or below standard. Such return of goods to the set
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