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Lecture 03
- 2. Accounting Terminologies Proprietor • Owner of business • Invests his capital, gives his time and attention • Enjoys profit and bears loss Capital • Amount of cash or the value of goods or both invested by the owner in business
- 3. Cont… Owner’s Equity • Internal source of financing • Includes investments, share capital, reserves and retained earnings Drawings • Withdrawal of cash or goods • Private and personal use
- 4. Cont… Purchases • Bought merchandise • Intention of selling I. Cash purchases: against cash II. Credit purchases: against future payment promise Purchases Returns • Purchased goods, returned to the supplier/ seller (Defective, Not according to sample Damaged, Excess of the quantity ordered)
- 5. Cont… Purchases Allowance • Benefit of reduction of purchase price • Due to defect or a damage Purchases Discount • Reduction in price at the time of purchase Sales • Goods sold to earn profit
- 6. Cont… Sales are divided into: 1.Cash Sales: for cash 2.Credit Sales: for promise to receive cash in future. Sales Returns: • Sold goods returned from customer (Defective, Not according to sample, Damaged, Excess in quantity ordered)
- 7. Cont… Sales Allowances • Benefit of reduction in the sale price due defect or damage Sales Discount: • Reduction in the price at the time of sales Stock/Inventory • Unsold goods at the end of accounting period
- 8. Cont… Voucher • Evidence of transaction occurrence • Written documents used in exchange of goods or services Cash Memo: • Written documents used for cash transactions Invoice Written documents of credit transactions
- 9. Cont… Accounting period • Period for which financial statements are prepared Debtors (Accounts Receivables) • Persons from whom amount is to be received Creditors (Accounts Payable) • Persons to whom amount is to be paid
- 10. Cont… Trade Discount • Deduction allowed by a trader on the list price of the product Cash Discount • Deduction allowed by a creditor to his debtors for prompt/ early payment Assets • Valuable things possessed by the business
- 11. Cont… Expense • Cost of doing the business/ performing business operations Accounting Cycle • Sequence of accounting procedures used to record, classify, summarize and interpret the business transactions.
- 13. Thank You…