This is related to leaning Accounts.

1. Session 1:
Introduction to Accounting
Duration: 2 hours

2. Session Plan
Activity Location Materials
Needed
Duration
(minutes)
Introduction Classroom Presentation 10
Accounting Terms Classroom Presentation 20
Objectives of
Accounting
Classroom Presentation 10
Business Types Classroom Presentation 20
Business Interactions Classroom Presentation 10
Business Structures Classroom Presentation 20
CYU Classroom Presentation 20
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3. Session Plan
Activity Location Materials
Needed
Duration
(minutes)
Summary Classroom Presentation 10
Total 120 min
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4. Session Objectives
By the end of this session, you will:
Understand common accounting terms.
Explain the basic objectives of accounting.
Explain the different types of businesses.
Describe the different types of business structures.
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5. Introduction: Scenario
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Joginder Starts a Business

6. Introduction: Scenario
Joginder is a young man who helps his father on the farm.
He dreams about starting his own business. He has saved Rs.
2,000 and decides to start a vegetable selling business.
He plans to buy vegetables from his village and transport
them to the town on a cart. He thinks he will be able to sell the
vegetables at a higher price than he bought them, by going
house to house in the town.
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7. Introduction: Scenario
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Joginder sets out to buy a cart and the vegetables.
His friend tells him about a carpenter in the next village who
makes and sells carts. Joginder sets out to meet him and
make a purchase.
He finds out that a cart is of Rs. 3,000. He pays Rs. 2000,
takes the cart, and promises to pay the remaining Rs. 1000
within the next 3 days.

8. Introduction: Scenario
When Joginder goes home, he shows the cart to his brother,
who agrees to give him Rs. 2000, to pay the remainder on the
cart and buy vegetables. Joginder’s brother is interested in
this business, and decides to become a partner.
The next morning, Joginder goes to the village vegetable
seller, Hari, and explains his plan. Hari takes Rs. 1,000 from
Joginder, and promises to keep vegetables for him to collect
every morning on his way to the town.
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9. Accounting Terms
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Character Accounting
Term
Meaning
Joginder Owner/ Proprietor A person who owns the business.
Joginder’s
brother
Investor Person who invests money in a
business. This may be a person
other than the owner.
Carpenter Creditor A person or company to whom a
firm owes money.
Hari Debtor A person or company who owes
money to the firm.

10. Accounting Terms
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Items/ Money Accounting
Term
Meaning
Cart, costing Rs.
3000
Asset Resources owned or controlled by the
business. These resources are
expected to provide benefits to the
business in the future. Benefits can be
money, material or equipment.
Rs. 4,000 paid
by Joginder and
his brother
Owner’s
Equity
The amount contributed by the owner
of the business, to start the business.
Rs. 1,000 owed
to the Carpenter
Liability Something that the business currently
owes (has to give) to another party.

11. Terms Joginder’s Business
By selling vegetables every day, Joginder will earn money.
To be able to sell the vegetables in the town, he will have
to spend money in buying from the village wholesaler.
On most days, he will sell the vegetables at a higher price
than he bought them.
Sometimes, for any reason, he may have to sell the
vegetables for a lower price than he bought them.
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Accounting Terms
Let us understand Joginder’s business through Accounting Terms

12. Terms Joginder’s Business
Income By selling vegetables every day, Joginder will earn money.
Expenditure To be able to sell the vegetables in the town, he will have
to spend money in buying from the village wholesaler.
Profit On most days, he will sell the vegetables at a higher price
than he bought them.
Loss Sometimes, for any reason, he may have to sell the
vegetables for a lower price than he bought them.
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Accounting Terms
Let us understand Joginder’s business through Accounting Terms

13. Terms Definitions
Income Total money earned by a company.
Profit Income made or money earned/gained through the
business. It happens when the the amount made by selling
a product is more than the amount spent to make it.
Loss Money lost through the business. It happens when the
amount by which the cost of a product is more than the
price at which it is sold.
Expenditure The money spent on making the goods and services. E.g.
salary, purchase of goods, purchase of machinery,
purchase of furniture, etc. are examples of expenditure.
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Accounting Terms

14. Accounting Terms: Scenario
Soon Joginder’s vegetable business is doing very well. He
starts supplying to homes as well as restaurants. He has
some regular customers, who do not pay every time they take
vegetables, but instead, they pay on a monthly basis.
Joginder starts keeping track of customers and how much
they owe him. He starts maintaining a book where he writes
down who owes him money, and to whom he owes money. He
starts giving receipts to customers that show what they
bought, and how much they paid.
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15. Terms Definitions
Financial Transactions The simple give and take of money.
Receipts Formal written proof that something of value has
been received.
Payments The money that is to be given out in exchange of
the goods/services provided.
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Accounting Terms

16. Objectives of Accounting: Scenario
Joginder and his brother have so much business now that
they think they should expand to two more carts and some
more people to help them supply the vegetables to their
customers.
They want to calculate their profit to see how much more they
can spend on the business.
How will they find out if they have made a profit?
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17. Objectives of Accounting
Maintaining Records Helps to maintain a proper record of all financial
transactions in a ‘book of accounts’.
Helps in knowing who needs to give you money
and from whom you need to take money.
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Financial Position Helps to find the financial position of the
business in the form of its assets and liabilities
at the end of every accounting period. The
document that tells us this is known as Balance
Sheet.
Profitability Trend Has the business earned profits or suffered
losses?
Helps in getting bank loans.
Helps in getting investors.

18. 18
Business Types
Business Types
Profit
Sole
Proprietorship
Partnership
Non-profit
NGOs

19. Business Types
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Terms Definitions
Profit Primary goal is making money (a profit).
Examples: Retail companies, hotels and restaurants,
manufacturing companies etc.
Non-Profit Focuses on a goal such as helping the community. Is
concerned with money only as much as it is necessary to
keep the organisation operating.
Examples: Charitable hospitals, Old age homes etc.

20. 20
Business Types
Apart from Sole Proprietorship & Partnership, there are two other types of
businesses. These are Corporation and Limited Liability Company.
Business
Types
Profit
Sole
Proprietorship
Corporation Partnership
Limited
Liability
Company
Non-profit
NGOs

21. Business Interactions: Scenario
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Customers
Those who bought vegetables
from Joginder
Business Entity
Joginder +
Brother
Vendors/Suppliers
Those from whom Joginder
bought vegetables
Sources of Equity
Joginder and his brother, who
invested capital

22. Business Interactions: Scenario
A complex real-world business has more entities. Let us see
which are these entities.
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23. Business Interactions: Scenario
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Customers who buy
products
Real-World
Business Entity
Vendors
Suppliers of Materials
Sources of Equity
More than one individual
is owner
Investors/Shareholders
Employees who work
in the business
Sources of Loan Capital
Creditors (e.g. Bank)
Government that
collects taxes

24. Business Structures
You learned about Partnership and Sole Proprietorship in
simple terms. This is a business classification based on
number of owners.
In the real world because a business interacts with many
entities, the business structures are defined on the basis
of other rules. These are:
 Separate Legal Entity (Customers, Vendors, Creditors,
Government)
 Liability (Creditors)
 Income Tax (Government)
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25. Business Structures
Separate Legal Entity means how a company interacts with
the people outside who have interests in the company’s
business. (Customers, Vendors, Creditors, Government).
Number of owners means how many people own the
business and have a share in the profit of the business. In
small businesses, it may be one or two owners, but in large
businesses, there are shareholders who are owners.
Liability means the company’s liability towards its creditors, i.e.
those to whom the company owes some money.
Income Tax means what the business pays to the government.
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26. Business Structures
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Sole
Proprietorship
Partnership Corporation Limited
Liability
Company
(LLC)
Separate
Legal
Entity
No No Yes Yes
Number.
of
Owners
One Two or more One or more One or more
Liability
Unlimited
personal liability
Unlimited
personal
liability
Limited
liability
Limited
liability

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Business Structures
Sole
Proprietorship
Partnership Corporation Limited
Liability
Company
(LLC)
Income
Tax
Individual owner
Individual
partner
Double
Taxation
(corporation
and
stockholders)
Can elect to
be taxed as
a
corporation,
partnership
or sole
proprietorshi
p

28. Business Structures
Sole Proprietorship Partnership Corporation Limited Liability
Company (LLC)
Sole Proprietorship and Partnership:
All financial transactions and communication is assumed to be from
the owner/partners.
Corporations and Limited Liability Company:
All financial transactions and communication is assumed to be from
the company as a whole and not from any individual. For example, if
you receive a letter from a limited company, which is signed by the
Managing Director of the company, it is assumed that the letter is sent
by the company and not by the individual whose signature it has.
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Separate
Legal
Entity
No No Yes Yes

29. Sole Proprietorship and Partnership: Do not need any registration with
any Government agency. However, various licenses are applicable to do
business e.g. Service Tax, Value Added Tax.
Corporations and Limited Liability Company: Need to register with a
government agency.
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Business Structures
Sole
Proprietorship
Partnership Corporation Limited
Liability
Company
(LLC)
Number. of
Owners
One Two or more One or more
One or
more

30. Liability
Company
(LLC)
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Business Structures
Sole
Proprietorship
Partnership Corporation Limited
Liability
Unlimited
personal liability
Unlimited
personal
liability
Limited liability
Limited
liability
Sole Proprietorship and Partnership: These businesses will have to
sell even their personal assets to pay off their creditors.
Corporations and Limited Liability Company: Only the company
assets will be sold to pay off the creditors.

31. 31
Business Structures
Sole
Proprietorship
Partnership Corporation Limited
Liability
Company
(LLC)
Income
Tax
Individual owner
Individual
partner
Double
Taxation
(corporation
and
stockholders)
Can decide to
be taxed as a
corporation,
partnership or
sole
proprietorship

32. Business Structures
Sole Proprietorship: Income Tax paid by an individual owner.
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Partnership: Income Tax paid by all the partners.
Corporations: Income Tax paid by the company and
shareholders.
Limited Liability Company: Can decide whether all partners
are to be taxed or whether an individual owner takes
responsibility for paying tax.

33. Business Structures: Examples
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Sole
Proprietorship
Partnership Corporation LLC
Example
Computer Repair
Shops
Mobile Repair
Shops
Rastogi
Brothers
Tata
Consultancy
Services
Family
Group LLC
India

34. Check Your Understanding
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CHECK YOUR UNDERSTANDING

35. Check your Understanding
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Match the following terms with the correct definitions.
Term Definition
Owner’s
Equity/Capital
Resources owned or controlled by the business.
Assets Something that the business currently owes (has to
give) to another party.
Liabilities The amount contributed by the owner of the business,
to start the business.
Sole
Proprietorship
Businesses that are owned by two or more people.

36. Check your Understanding
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Match the following terms with the correct definitions.
Term Definition
Partnership Businesses that are owned by a single person.
Debtor A person or company to whom a firm owes money.
Creditor A person or company who owes money to the firm.

37. Check your Understanding (Scenario)
Read the following situation and answer the questions that follow.
Mr. Ramesh started a computer coaching center. He is running
the center from one of the rooms in his house. He bought 4
computer tables using his own money. Then he took a loan from
the bank to buy computers. He has four students now all of whom
have paid fees. He earns INR 30,000 per month. He has to pay INR
7,000 as the EMI to the bank, on a monthly basis.
Mr. Suresh is offering Mr. Ramesh his back yard to be used as the
administrative office of the coaching center. In return, Mr. Ramesh
will provide Mr. Suresh, a share in the profit.
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38. Check your Understanding (Question)
Who is the owner of the business?
a) Mr. Ramesh
b) Mr. Suresh
c) Bank
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39. Check your Understanding (Answer)
Who is the owner of the business?
a) Mr. Ramesh
b) Mr. Suresh
c) Bank
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40. Check your Understanding (Question)
Who is the investor in the business?
a) Mr. Ramesh
b) Mr. Suresh
c) Bank
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41. Check your Understanding (Answer)
Who is the investor in the business?
a) Mr. Ramesh
b) Mr. Suresh
c) Bank
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42. Check your Understanding (Question)
Who are the debtors in the business?
a) Mr. Suresh
b) Bank
c) Students
d) None
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43. Check your Understanding (Answer)
Who are the debtors in the business?
a) Mr. Suresh
b) Bank
c) Students
d) None
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44. Check your Understanding (Question)
Which are the assets in the business?
a) Computer Tables
b) Computers
c) Mr. Suresh’s Backyard
d) All of the Above
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45. Check your Understanding (Answer)
Which are the assets in the business?
a) Computer Tables
b) Computers
c) Mr. Suresh’s Backyard
d) All of the Above
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46. Check your Understanding (Question)
Which is NOT a liability in the business?
a) Computer Tables
b) Students’ Fees
c) Loan for Computers
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47. Check your Understanding (Answer)
Which is NOT a liability in the business?
a) Computer Tables
b) Students’ Fees
c) Loan for Computers
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48. Summary
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Accounting is advantageous to not only the business
management but also to external parties.
The objectives of accounting are the following:
Maintaining records, and finding out the financial
position of the business and its profitability trend.
Different users of accounts have different use for the
same accounting information and they go through it for
personal interests.
There are two types of businesses, profit and non-profit.

49. Summary
A for-profit business structure may be any one of the
following: Sole Proprietorship, Partnership, Corporation
or a Limited Liability Company.
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50. Thank You!
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