You are on page 1of 4

Proudly Presented To our Commerce Graduates.

By Devarajan

1. Golden Rules of Accounts:

➢ PERSONAL ACCOUNT: Debit the Receiver | Credit the Giver. E.g.: Mohan A/c.
➢ Real Account: Debit what comes in | Credit what goes out. E.g.: Machinery A/c.
➢ Nominal Account: Debit all expenses and losses | Credit all income and gains. E.g.: Salary A/c.

2. Deprecation:

Deprecation is a gradual reduction of fixed asset. Every year the asset value decrease from its original
value. Journal Entry: Deprecation A/c dr- To Fixed Asset A/c.

3. Debentures: It is a type of commercial bond. It usually issued by a company or a government agency.

4. Dividend: It is a income for company, which is paid to a people who having shares in a company.

5. Bank Reconciliation Statement (BRS): It is a difference between cash book maintained by customer
and passbook maintained by bank. Example: Cheque issued but not presented.

6. Shares: Share can be bought by a people has an investment.

7. Balance Sheet: It is a statement which shows financial position of a company.

8. Final Account: It is a statement which is prepared at the end of accounting period. It includes Trading,
Profit & loss, Balance sheet.

9. Types of Accounts: Personal and Impersonal Account.

✓ Personal Account: Account which is relate to a person, Organization etc.


✓ Impersonal Account: It is divided into Real and Nominal account.

Real Account: It is divided into two types, Tangible and Intangible Asset.

Tangible Asset: The asset which have proper size, shape, or existence. E.g.: Plant& Machinery, Cash etc…

Intangible Asset: The asset does not have proper shape, size or existence. E.g.: Goodwill, Patent rights etc…

Nominal account: Accounts does not related to Individual or Asset. E.g.: Salary Account

10. Accounts Payable: Accounts payable are the amount a company, purchase goods or services on
credit from supplier or vendor.

11. Accounts Receivable: Accounts Receivable are the amount which has right to collect, because it sold
goods or services on credit to a customer.

12. Prepaid Expenses: Expenses which has been paid in advance.

13. Accruals / Accrued Income: Income received during particular account period, but not fully received
at the end of same year.

1|Page- Created On 19/12/2014 ©-Incometax56.weebly.com


Proudly Presented To our Commerce Graduates. By Devarajan

14. Liability: Liability refers to a financial obligation of a business. E.g.: Loan borrowed from bank.

15. Contingent Liability: It may or may not occur. Those are called Contingent liability.

16. Goodwill: It is an intangible asset. Which shown on asset side of the balance sheet.

17. Liquidity: It can be easily converted into cash. Formula: Liquid Ratio: Liquid Asset/Current Liability.

18. Working Capital: Day to day needs of business expenses. Working capital: Current Asset- Current Liability.

19. Trail Balance: It is a statement which shows debit and credit balance of ledger account, to test the
arithmetical accuracy of the book.

20. Invoice: Invoice is a business document which is prepared by seller of goods. It includes Invoice
Date, Number, Amount, etc…

21. Debtor: Is a person who receives benefit but without giving money or money’s worth immediately
but liable to pay in future or in due course of time.

22. Creditor: Is a person who gives benefits but without receiving money or money’s worth immediately
but to claim in future.

23. Fund Flow Statement: Working capital concepts of the funds.

24. Cash Flow Statement: Cash concepts of the funds.

25. Voucher: Is a written document in supporting for a transaction, Voucher is necessary for audit the
account.

26. Journal: Is a date wise recorded business transaction.

27. Ledger: Is a book in which a company or organization, writes down the amounts of money spends
and receives.

28. Cash Budget: It is document that shows the timing of cash inflow and outflow of the company.

29. Current Liability: This can be repayable within one year. It includes Bills payable, Outstanding Expenses etc…

30. Provision: It means specific losses like provisions for bad and doubtful debts, Deprecation etc…

31. Book- Keeping: It is a day to day record of business transaction.

32. Expenses: Expenses means, to purchase raw material and then to produce the goods.

33. Management Accounting: To make correct decision in accounting rules of the organization.

34. Cost Accounting: The process of record of each element of cost.

35. Current Asset: The assets which can be easily convert into cash within one year.

2|Page- Created On 19/12/2014 ©-Incometax56.weebly.com


Proudly Presented To our Commerce Graduates. By Devarajan

36. Fixed Asset: The life of an asset will be more than one year or more.

37. Revenue: Revenue is the income for the company for doing main activities such as selling goods or
providing services.

38. Cash: It is an Current Asset, Which shown on asset side of balance sheet.

39. Purchase: purchase is a trading account item, which shown on Debit side of trading account. It is
divided into two types; Cash purchase, or Credit Purchase.

40. Sale: It is divided into two types; Cash sales, or Credit sales, which shown on Credit side of trading account.

41. Reserve: It is part of saving for the organization, which helps the organization in dangerous situation.

42. Basic Concepts of Accounts: (5 Types)

➢ Business Entity Concepts: Business is separate from owner.


➢ Money Measurement Concepts: Only facts of money can be measured, to find place in accounting.
➢ Going Concern Concepts: Business continues for long period.
➢ Accounting Period Concepts: The statement is prepared for particular accounting period.
➢ Dual Aspects Concepts: Every business transaction has two aspects, (i.e.) debit and credit.

43. Outstanding Expenses: Expenses paid but not fully paid during particular accounting period.

Journal Entry: E.g.: Wages A/c Dr- To Wages Outstanding A/c.

44. Finance: It is nothing but arts and science, of raising and spending of money/ funds.

45. Mutual Funds: It is kind of investment, money invested by investor in stocks or bonds. It has divided
into 3 types:

➢ Equity Fund. → Risk is high.


➢ Fixed Income Fund, And → Risk is low.
➢ Balanced Fund. → Equal amount of risk and benefit.

46. Accumulated Depreciation: It is a long term contra asset account.

47. Stocks: stocks Unsold on particular date. It is divided into: Opening and closing stock.

48. Tax: Tax is a compulsory monetary contribution to a state revenue assessed and imposed by
government.

49. Drawings: Owner withdraws money from his own business for his personal use. Journal Entry: Drawing A/c Dr to Cash A/c.

50. Bad Debts: It is a amount cannot be recovered due to insolvency of persons or mental dishonor.

➢ Journal Entry: Bad debts A/c Dr to Sundry Debtors A/c.

51. Ratio Analysis: It is a relationship between items or group of items in financial statement.

3|Page- Created On 19/12/2014 ©-Incometax56.weebly.com


Proudly Presented To our Commerce Graduates. By Devarajan

52. (2 Types of Shares): Equity Shares and Preference Share

Equity Share: The rate of dividend will not be fixed. It has voting rights.

Preference Share: The rate of dividend will be fixed. It has not voting rights.

53. Income: It is a difference between revenue and expenses.

ITEMS IN BALANCE SHEET:

Liabilities Assets
Share Capital Investment
Issues of Shares Fixed Asset
Subscribed and Paid up capital Current Asset, Advance& Loans
Reserves & Surplus Miscellaneous Expenditure
Secured & Unsecured Loan Closing Stock
Current Liability & Provisions -------------------------------------------
Contingent Liability -------------------------------------------

Journal Entry:

Cash Purchase → Purchase A/c Dr to Cash A/c

Credit Purchase → Purchase A/c Dr to Sundry Creditors A/c -2 Mark –Wipro.

Purchase Return → Cash A/Dr to Purchase Return A/c

Cash Sales → Cash A/c Dr to Sales A/c

Credit Purchase → Sundry Debtor A/c Dr to Sales A/c -2 Mar –Wipro.

Sales Return → Sales Return A/Dr to Cash A/c

➢ Ram started business Rs. 5, 00,000. Give Journal Entry.

→ Cash A/c Dr to Capital A/c

➢ Important: Rent for the current month but payment made on next month?
→ Rent A/c Dr to Rent Outstanding A/c. -3 Mark. –Wipro.

***************************

4|Page- Created On 19/12/2014 ©-Incometax56.weebly.com

You might also like