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ACCOUNTING
For sole and Partnership firm
Accounting terms
 Assets: Assets are the properties
or resources which are owned
by the business entity. In general
these are the things which are
used to facilitate business and
not to sell them.
 Assets may be further classified
as Tangible assets and
intangible assets.
Accounting terms (Cont...)
 Tangible assets: are those assets which
have physical existence, i.e., we can
touch, see these assets. Examples are
land and building, plant, machinery, cash
etc.
 Intangible assets: cannot be seen or
touched.
Accounting terms (Cont...)
 Liabilities: Liabilities are the debts owed
by the business entity to outsiders.
 Capital: Capital represents the owner’s
claim or share in the assets of the business.
In common sense, capital is the amount
invested by the proprietor in his business.
In Accountancy, capital is defined as the
excess of the value of assets over the
liabilities. It can be shown with the
equation.
 Capital = Assets - Liabilities
Accounting terms (Cont...)
Drawings: Drawings means the amount
of cash or any asset withdrawn by the
owner of the business for his personal or
domestic use.
 Debtor: Debtor is a person who owes any
amount to another person. In case of a
business, debtor is a person who has
purchased some goods on credit. Until he
pays the due amount he remains as a
debtor in the books of the business.
Accounting terms (Cont...)
 Creditor: Creditor is a person to whom any
sum is owed i.e. payable by the business.
Solvent: Solvent is a person whose assets
are equal to or more than that of his
liabilities. It means, he is capable of
paying all his dues/debts in full.
Accounting terms (Cont...)
 Net Worth: Net Worth of a business means
the aggregate amount of proprietor’s
capital, reserves and accumulated
profits. The equation is,
Net Worth = Capital +Reserves +Profits (or –
losses)
 In simple words: Net Worth = Total Assets –
Outside liabilities
Accounting terms (Cont...)
 Goods: The term “Goods” includes all
commodities, articles or products which are
purchased for the purpose of resale. Goods
refer to any type of merchandise in which a
trader deals in.
 Purchases: Purchases means goods
purchased for resale. Such purchases may be
for cash or on credit. But any materials
purchased for use in the office are not termed
as purchases. Purchases are the goods clearly
meant for resale by the businessman.
Accounting terms (Cont...)
 Sales: The term “Sales” means goods sold
for cash or on credit. But it does not
include sale of any asset. Sales constitute
the revenue of the business.
 Purchases Returns (or Returns Outwards):
Means the goods which are purchased
are returned to the supplier for reasons
such as damages, poor
quality, overcharging, not as per order
etc.
Accounting terms (Cont...)
 Sales Returns (or Returns Inwards): Means
the goods which were sold to customers
are now returned for the reasons
mentioned above.
 Stock: On any given date, there will be
some goods which remains unsold. Thus
stock is the value of such unsold goods.
For Sole Proprietorship
 Profit and Loss Account (P&L Account)
Particulars Rs
.
Particulars Rs.
To Profit and Loss A/c(loss
transferred from Profit & Loss A/c)
To Salary
To Commission
To Interest on Capital
To Reserve A/c
To Profit transferred to current
account
By Profit and Loss
account(Profit transferred
from P & L account)
By Interest on Drawings
By Loss transferred
to current accounts
Profit and Loss Appropriation
Account
Particulars Total
Add
Less
Net profit
Interest on drawings
Interest on capital
Commission
Salary
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
For Partnership Firm
 Partners' Current Account
Particulars Partner
A
Partner
B
Particulars Partner
A
Partner
B
Balance b/d
Drawings
Interest on
drawings
Balance c/d
Balance b/d
XXX
XXX
XXX
XXX
XXX
XXX1
XXX3
XXX
XXX
XXX
XXX
XXX
XXX2
XXX4
Balance b/d
Interest on
Capital
Salary
Commission
Share of Profits
Balance c/d
Balance b/d
XXX
XXX
XXX
XXX
XXX
XXX
XXX3
XXX
XXX1
XXX
XXX
XXX
XXX
XXX
XXX
XXX4
XXX
XXX2
Profit and Loss Appropriation
Account
Particulars Total
Add
Less
Net profit
Interest on drawings
Partner A (XXX)
Partner B (XXX)
Interest on capital
Partner A (XXX)
Partner B (XXX)
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
CONT…
Profit and Loss Appropriation
Account (Cont…)
Particulars Total
Less
Less
Commission
Partner A (XXX)
Partner B (XXX)
Salary
Partner A (XXX)
Partner B (XXX)
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXXX
CONT…
 Consider Partner A’s and Partner B’s share
in business is in the ratio of 50:50
 Then profit or loss for partners are as
bellow:
 Partner A (1/2 * XXXX) = XXX
 Partner B (1/2 * XXXX) = XXX
Accounting

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Accounting

  • 1. ACCOUNTING For sole and Partnership firm
  • 2. Accounting terms  Assets: Assets are the properties or resources which are owned by the business entity. In general these are the things which are used to facilitate business and not to sell them.  Assets may be further classified as Tangible assets and intangible assets.
  • 3. Accounting terms (Cont...)  Tangible assets: are those assets which have physical existence, i.e., we can touch, see these assets. Examples are land and building, plant, machinery, cash etc.  Intangible assets: cannot be seen or touched.
  • 4. Accounting terms (Cont...)  Liabilities: Liabilities are the debts owed by the business entity to outsiders.  Capital: Capital represents the owner’s claim or share in the assets of the business. In common sense, capital is the amount invested by the proprietor in his business. In Accountancy, capital is defined as the excess of the value of assets over the liabilities. It can be shown with the equation.  Capital = Assets - Liabilities
  • 5. Accounting terms (Cont...) Drawings: Drawings means the amount of cash or any asset withdrawn by the owner of the business for his personal or domestic use.  Debtor: Debtor is a person who owes any amount to another person. In case of a business, debtor is a person who has purchased some goods on credit. Until he pays the due amount he remains as a debtor in the books of the business.
  • 6. Accounting terms (Cont...)  Creditor: Creditor is a person to whom any sum is owed i.e. payable by the business. Solvent: Solvent is a person whose assets are equal to or more than that of his liabilities. It means, he is capable of paying all his dues/debts in full.
  • 7. Accounting terms (Cont...)  Net Worth: Net Worth of a business means the aggregate amount of proprietor’s capital, reserves and accumulated profits. The equation is, Net Worth = Capital +Reserves +Profits (or – losses)  In simple words: Net Worth = Total Assets – Outside liabilities
  • 8. Accounting terms (Cont...)  Goods: The term “Goods” includes all commodities, articles or products which are purchased for the purpose of resale. Goods refer to any type of merchandise in which a trader deals in.  Purchases: Purchases means goods purchased for resale. Such purchases may be for cash or on credit. But any materials purchased for use in the office are not termed as purchases. Purchases are the goods clearly meant for resale by the businessman.
  • 9. Accounting terms (Cont...)  Sales: The term “Sales” means goods sold for cash or on credit. But it does not include sale of any asset. Sales constitute the revenue of the business.  Purchases Returns (or Returns Outwards): Means the goods which are purchased are returned to the supplier for reasons such as damages, poor quality, overcharging, not as per order etc.
  • 10. Accounting terms (Cont...)  Sales Returns (or Returns Inwards): Means the goods which were sold to customers are now returned for the reasons mentioned above.  Stock: On any given date, there will be some goods which remains unsold. Thus stock is the value of such unsold goods.
  • 11. For Sole Proprietorship  Profit and Loss Account (P&L Account) Particulars Rs . Particulars Rs. To Profit and Loss A/c(loss transferred from Profit & Loss A/c) To Salary To Commission To Interest on Capital To Reserve A/c To Profit transferred to current account By Profit and Loss account(Profit transferred from P & L account) By Interest on Drawings By Loss transferred to current accounts
  • 12. Profit and Loss Appropriation Account Particulars Total Add Less Net profit Interest on drawings Interest on capital Commission Salary XXX XXX XXX XXX XXX XXX XXX XXX XXX
  • 13. For Partnership Firm  Partners' Current Account Particulars Partner A Partner B Particulars Partner A Partner B Balance b/d Drawings Interest on drawings Balance c/d Balance b/d XXX XXX XXX XXX XXX XXX1 XXX3 XXX XXX XXX XXX XXX XXX2 XXX4 Balance b/d Interest on Capital Salary Commission Share of Profits Balance c/d Balance b/d XXX XXX XXX XXX XXX XXX XXX3 XXX XXX1 XXX XXX XXX XXX XXX XXX XXX4 XXX XXX2
  • 14. Profit and Loss Appropriation Account Particulars Total Add Less Net profit Interest on drawings Partner A (XXX) Partner B (XXX) Interest on capital Partner A (XXX) Partner B (XXX) XXX XXX XXX XXX XXX XXX XXX XXX XXX CONT…
  • 15. Profit and Loss Appropriation Account (Cont…) Particulars Total Less Less Commission Partner A (XXX) Partner B (XXX) Salary Partner A (XXX) Partner B (XXX) XXX XXX XXX XXX XXX XXX XXX XXX XXXX CONT…
  • 16.  Consider Partner A’s and Partner B’s share in business is in the ratio of 50:50  Then profit or loss for partners are as bellow:  Partner A (1/2 * XXXX) = XXX  Partner B (1/2 * XXXX) = XXX