Accounting basic concepts

2. • AQIL NAWAZ
• MPA
• Comsats Attock
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3. • Accounting is a language of business.
• Accounting is the art of recording,
classifying, & summarizing in a significant
manner and in terms of money,
transactions & events, which are, in part at
least, of a financial character and
interpreting the result thereof.
ACCOUNTING
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4. • Any dealing b/w two persons or parties is
called transaction.
• Any dealing of a business that involves
buying & selling of goods & services in
exchange of value be called as business
transaction.
• CASH TRANSCATION
• CREDIT TRANSCATION
TRANSCATION
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5. • Short term financial obligations.
• A/C payable are also called Creditors.
• When goods are purchase from suppliers
on credit basis creditors came into
existence.
ACCOUNTS PAYABLE
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6. ACCOUNTS PAYABLE
• Creditors are the persons or suppliers
from whom goods have been purchased
on credit basis and to whom money is to
be paid in near future. The accounts of
such suppliers are known as Accounts
Payable.
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7. ACCOUNTS RECEIVABLE
• Amounts owed to the firm by customers.
• A/C Receivable are also called Debtors.
• When goods are sold to the customers on
credit basis debtors came into existence.
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8. ACCOUNTS RECEIVABLE
• 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.
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9. • Discounts is a concession/reduction in
price.
• The discount which is given or received at
the time of payment is called Cash
Discount.
• The discount which is offered at the time
of dealing is called Trade Discount.
DISCOUNTS
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10. DISCOUNTS
• When concession is given by the business
is called Discount Allowed.
• When concession is received by the
business is called Discount Received.
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11. • In accounting the word “Goods” has a
special meaning. It refer to something
which is purchase for resale purpose or
any thing which has been manufacturing
for resale purpose.
GOODS
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12. Goods
• Goods are the things which are bought for
resale purpose.
• Goods are also called MERCHANDISE.
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13. • When saleable goods are bought in a
business it is said that purchases
have been made.
• When goods are purchased from
suppliers and payment is made to him
at the same time such purchases are
known as Cash Purchases.
PURCHASES
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14. PURCHASES
• Rather the payment is arranged to be
made at some future date such purchases
are known as Credit Purchases or
purchases on A/C.
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15. Purchases Return /
Return outwards
• When purchase goods are return back to
suppliers for any certain reasons (goods
are defective, not according to
specification, damaged or below
standard), such return of goods are known
as Purchases Return / Return outwards.
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16. • When goods are sold to customer at a specific
price , it is said that sales have been made
• Cash Sales
• Credit Sales
Sales
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17. • If a customer to whom goods have been sold find
that goods are defective, not according to
specification, damaged or below standard, he
may return these goods to the seller such return
of goods are known as Sales Return / Return
Inwards.
Sales
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18. NOTES RECEIVABLE
• It is a written evidence to get money, such
a documents which is proof that business
will receive money in near future or at a
specific date.
• Legal signed documents exist.
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19. NOTES PAYABLE
• A note payable is a written
promissory note. Under this agreement, a
borrower obtains a specific amount of
money from a lender and promises to pay
it back over a predetermined time period.
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20. Assets
• Assets are properties and possessions of
a business both tangible and intangible.
• Assets are the economic resources of a
business on a particular date and which
are expected to benefit the future
operations of a business.
• Economic resources of a business which
are owned by a business to earn profit
(future benefit).Land, building, furniture
etc. 2-20

21. • Liabilities are the debt or obligations of a
business.
• The amount which are payable by the
business.
• Liability means the total amount which a
business is legally bound to pay to the
outsiders e.g. creditors, bank loan, A/C
payable, bill payable, etc.
LIABILITY
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22. LIABILITY
• There are two main party who have claim
against the assets of a business.
• 1. Owner claim against the assets of a
business is known as owner equity.
• 2. Outsider claim is known as liabilities
or external equities.
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23. CAPITAL
• The amount which is invested by the
owner/owners in a business.
• Capital is money worth borrowed by a
business unit from its owner/owners or it is
a source of funds provided by the owners.
• Capital is a liability for business.
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24. 2-24
• It is a price of goods sold or services provided
by a business to a customers.
• Types of revenue
• Fees earned, rent earned, sales, interest
earned, commissioned earned.
REVENUE

25. • Cost of generating revenue is called
expense or expense are cost of producing
revenue in a particular accounting period.
• Interest paid, wages, advertising, admin
expense, rent paid, utilities bills,
manufacturing expense.
EXPENSE
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26. • ASSETS
• LIABILITY
• CAPITAL
• REVENUE
• EXPENSE
• These are called 5 elements of accounts
or 5 heads of accounts.
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