Course Title Accounting The Basis for Business Decisions ASSAD SAROBI MBA (Finance) M.Sc ( Economics)

ACCOUNTING Accounting. is an art of recording, classifying, summarizing,analyzing and interpretation of financial or economic information to make judgment to various uses Recording. means to record the transaction. it refers to ledger Classifying. Refers to ledger Summarizing. Refers to trial balance

Conti….. Analyzing & Interpretation. Refers to comparison of various items given in the financial statements Financial statements. Refers to Income statement and Balance sheet JOURNAL. it is book of original entry to record in order of date and in detail the various transactions of a trader. it is also name as” DAY BOOK”

DateDescriptionRef#DrCr Journal

Conti….. LEDGER: It is the book, which contains classified record of all transactions, generally transfer from book original entry. It is also known as book of second entry. Expand A/C Cash A/C TRAIL BALANCE : A statement, which is prepared by taking out debit and credit balance of all accounts appearing in the ledger. DrCr DrCr

Conti….. INCOME STATEMENT : A statement, which is prepared to determine the net result(profit or loss) of business, is called income statement. BALANCE SHEET : A statement, which is prepared to show the financial position of the business at the end of trading period, is called balance sheet.

Conti…… TRANSACTION : Any dealing, buying and selling between two persons and business enterpriser is called transaction. There are two types of transaction. CASH TRANSACTION : When cash is paid or received as a result of exchange, called cash transactions.

Conti………. CREDIT TRANSATION : When the payment or receipt of cash is postponed for future date, called credit transaction. BUSINESS : Any legal activity undertaken for the purpose of earning profit such as buying and selling of merchandise/goods called business.

Conti…… MERCHANDISE/GOODS : Things bought by a firm for the purpose of reselling are called merchandise. For example, bookseller sells the books, a textile mill produces cloth, the books and cloths are merchandise. PURCHASES : The cost of merchandise/goods bought is called purchases. Purchases may be of two types.

Conti…….. CASH PURCHASES: When the goods/merchandise are purchased for cash, it is called cash purchases. CREDIT PURCHASES : When the goods/merchandise is bought on credit it is called credit purchases. Book value.This is the amount at which an item appears in the books of account or f/s

Conti……. Cost.it is the amount of expenditure incurred on a specified product or activity Revenue. The gross inflow of cash,receivables arising in the course of the ordinary activities of an enterprise from the sales of goods, yielding interest,royalities,dividends. Sundry creditors. This is the amount having by an enterprise on account of goods purchase in respect of contractual obligations. it is referred to as N/P or trade creditors.

Cont………. Sundry debtors. They are persons or firms to whom goods have been sold on credit and having certain amounts to the business unit. they are also referred to as N/R or trade debtors. Working capital. These are funds available to an enterprise for conducting its day to day operations. This is represented by the excess of current assets minus current liabilities Working capital = Current Assets-Current liabilities

Conti….. Account receiver A/R : Account receivable is that amount which should be received in future or for which some one promise to pay it in future, for example credit sale. Note receivable N/R : Note receivable is that amount which should be received ind future and a written statement or contractual obligation is made for such transaction. For example credit sale.

Asset : Asset are the financial resources of an organization, which help in increasing the resource of an organization. There are two types of asset. 1 Current assets. 2 Fixed assets.

(1) Current assets : Current assets are those assets which are easily converted in to cash form, i.e The liquidity of such assets are very high. For example cash in hand, inventory account receivable, note receivable. (2) Fixed assets : Fixed assets are those assets which are not easily converted in to cash form.

For example the liquidity of such assets are not very high. For example, land, building,machinery. Account payables. A/P is that amount which is paid by company or any person on account of credit purchase.it means that the purchaser promise that the amount will be return in future.for example credit purchase.

Note payables. N/p is that amount which should be paid on account of credit purchase but some statement will be made for the return of mony.for example credit purchase Drawings. The cash or goods taken by the owner from the business for personnel use is called drawings

Conti….. Account. A summarized record of transactions relating to a person or thing is called an account. Liabilities. Liabilities are the debts due by a business to its proprietor and others