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Prof. Ms. Trupti naik

Accounting Terms (Semester I). Prof. Ms. Trupti naik. Types of income statements. Types of Business Activity. Trading Account. Format of Trading.docx. Stock refers to the goods lying unsold on a particular date. Purchases : Total items purchased for resale during the year.

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Prof. Ms. Trupti naik

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  1. Accounting Terms (Semester I) Prof. Ms. Trupti naik

  2. Types of income statements

  3. Types of Business Activity

  4. Trading Account Format of Trading.docx

  5. Stock refers to the goods lying unsold on a particular date.

  6. Purchases :Total items purchased for resale during the year. • It can be both in cash and on credit. • Purchases are shown on the debit side of the Trading a/c. • These are always shown as net purchases = Total purchases - Purchase returns. • Goods received on consignment basis are never treated as purchases. • Goods received on ‘sale or return’ basis are never treated as purchases.

  7. Sales: refer to the total revenue from sale of goods of the business. • It includes both cash sales and credit sales. • These are recorded on the credit side of the Trading A/c. • Sales are shown at their net value i.e. Total Sales – Sales Return. • Goods sent on ‘sale or approval’ are not part of sales until approval is received.

  8. Direct Expenses: are the expenses that can be attributed directly to the purchase of goods or goods manufactured. • These are shown on the debit side of the Trading A/c. 1. Wages i.e. wages relate to production. 2. Carriage /Cartage/ Freight i.e. amount paid for carriage of goods purchased or raw material purchased for manufacturing. 3. Customs and Import duty, packing materials, gas, electricity water, fuel, oil, heating and lighting, factory rent and insurance.

  9. Gross Profit/Gross Loss: It is the excess of net sales revenue over cost of goods sold. • Gross Profit = Net Sales - Cost of Goods Sold. • If, Total of credit side > Total of debit side = ‘Gross Profit’ and is shown on the debit side of Trading A/c. • If Total of debit side > Total of credit side = ‘Gross Loss’ and is shown on the credit side of the Trading A/c.

  10. Format of Profit and Loss.docx

  11. Depreciation and maintenance charges: Depreciation means decline in the value of fixed asset due to wear and tear, lapse of time, obsolescence, etc. • It is not charged to P/L a/c in the year in which it is purchased. • Expenses other than depreciation: Expense incurred on repairs and renewals, maintenance of assets. Other expenses: • Expenses which are not included under the above mentioned heads of expenses e.g. losses and expenses due to fire, theft etc.

  12. Balance Sheet • Balance sheet is a statement which shows the financial position of a business organization on a particular date which is generally the last date of the accounting period. Balance Sheet.doc

  13. Assets and Liabilities • Assets: refer to the financial resources of the business and can broadly be divided into Current Assets and Fixed Assets • Liabilities denote claims against the assets of the business. Liabilities can be of two types owners liability or capital and outsiders liabilities

  14. Fixed Assets • Purchased for permanent i.e. long term use and these help the business to earn revenue. • E.g. Building, Machinery, Motor Vehicle, etc. • These assets are not for sale in ordinary course of business but can be disposed off, if no more needed for business use.

  15. Current Assets • Acquired by the business either for resale or for converting them into cash. • These are normally realized within a period of one year. • E.g. cash in hand, cash at bank, bill receivable, debtors, stock etc.

  16. Tangible Assets • These are the assets that can be seen, touched and have certain volume e.g. Building, Machinery, goods etc. are tangible assets.

  17. Intangible Assets • Assets which can neither be seen nor touched and have no volume • E.g Patents, trademark, goodwill

  18. Long term Liabilities • These are the liabilities which are not payable during the current accounting year. • Generally, the funds raised through such means are used for purchase of fixed assets. • E.g. Capital, Reserves, loan on mortgage, loan from financial institutions.

  19. Owners’ funds • The amount owing to the proprietor or proprietors is called owners’ funds. • As per business entity concept this is a liability of the business. • Also includes undistributed profits and reserves.

  20. Current Liabilities • These are the liabilities which are payable during the current year. • E.g. Bank overdraft, trade creditors, bill payable etc.

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