Goods

Goods

Goods: This includes all articles, commodities or merchandise in which the business deals. Thus, cloth would be goods for a dealer in cloth; furniture would be goods for a dealer in furniture and so on.

Assets: It is something a company owns which has future economic value.

(Land Building Equipment goodwill)

Types of Assets : Assets may be classified into Current and Non-Current.

1. Current Assets are ones that an entity expects to use within one-year time from the   reporting date.

       Example : Inventory, Cash, Receivables etc

2. Non Current Assets are those whose benefits are expected to last more than one year from the reporting date.

      Example Machine, Office Building, Vehicle etc

Debit : The receiving aspect of a transaction is called debit or Dr.

Credit :The giving aspect of a transaction is called credit or Cr.

Debtor:  A debtor is a person who owes money. The amount due form his is called debtor.

Creditor: A person to whom money is owing or payable is called a creditor.

Goodwill: An intangible asset that exits when a business is valued at of its net assets.Interest: The cost of the use of money.

Current Liabilities: Liabilities to be paid within one year of the balance sheet date.

Drawings: Any amount or goods withdrawn by the owner of a business for personal use is called drawings.

Bad Debt: An uncollectible Account Receivable.

Inventory : Goods held by a firm for resale to customers.

Account payable : A liability that results form the purchase of goods or services on account.

Compound Entry : A transaction that affects more than two accounts.

Purchase : A purchase means goods purchased by a businessman from suppliers.

Sales : Sales is goods sold by a businessman to his customers.

Income: It is an inflow of assets which results in an increase in the owner’s equity.

Expense: They are amounts that have been paid or will be paid letter for costs that have been incurred to earn revenue.

Salaries and wages, Utilities, Supplies used advertising, rent, etc.

Profit : Excess of credit side over debit side.

Loss: A loss is expenditure without any benefit to the concern. On the other hand, expense is incurred to result is some benefit. Thus, amount spent on lighting is an expense but loss due to fire is loss.

Expenditure: Expenditure takes place when an asset or service is acquired. Expenditure will include both payment of a sum immediately and promise to pay it at a future date.

Turnover: It means total trading income form cash sales and credit sales.

Net worth: It means assets minus outside liabilities. Profits if a business increase net worth whereas losses reduce the net worth of a business.

GAAP: Refer to Generally Accepted Accounting Principles.

Journal: A book or original entry in a double-entry bookkeeping system. The journal lists all transaction and indicates the accounts to which they are posted.

Items in Journal :

Date : The first column deals with the date of transaction.

Particulars : In the first line write about debit aspect and in the second line write about credit aspect. In the third line write regarding brief explanation of the entry (narration).

Ledger Folio (L.F.) : It denotes page number on which its journal entry is found.

Debit : Fourth column deals with the amount to be debited.

Credit : Fifth column deals with the amount to be credited.

Performa of Journal

Date	Particular	L.F.	Dr. ()	Cr.()
25-12-2015	Name of the A/c Dr. To name of the A/c (Being ------)		XXXX	XXXX

Advantages of Journal :

Ø  It provides a chronological (date wise) order of all transactions and hence provides permanent record.

Ø  It provides the information of debit and credit in an entry and an explanation to make it understandable properly.

Ø  It reduces the possibility of errors as both aspects of a business transaction are written side by side.

Journal Entry: A recording of a transaction where debits equal credits.

Ledger: A summary statement of all the transactions relating to a person, assets, expenses or income which have taken place during a given period of time and show their net effect.

Performa of Ledger

Cash A/c

Dr.                                                                                                                                                           Cr.

Date	Particulars To name of Credit A/c	L.F.	Amount ()	Date	Particulars By name of Debit A/c	L.F.	Amount ()

Trail Balance: A listing of all accounts balances that provides a test of whether total debits equals total credits.

Performa of Trail Balance

Sl. No

Name of the Account

Debit ( )

Credit ()

Errors :

Ø  Omission of any entry in a subsidiary book.

Ø  A wrong entry in a subsidiary book.

Ø  Posting an item to the correct side but in the wrong account. Purchase from X and credited to Y.

Ø  Composing errors.

Ø  Errors of principals. These errors will not affect the agreement of the trial balance as they arise form the debiting or crediting of wrong heads of accounts.

Subsidiary Books : Cash book to record cash receipts and payment.

Ø  Simple Cash Book : It makes a record of all the receipts an payments of cash. All cash received in the form of coin, notes, cheques, postal orders, bank drafts or treasury notes will be recorded on the debit side and payments on the credit side.

Ø  Cash Book with discount column.

Ø  Cash book with Discount and bank column (Three column cash book).

Ø  Purchases Book is for recoding all credit purchases of goods.

Ø  Sales Book is for recoding all goods sold on credit.

Ø  Purchases retunes book (returns outwards book) for recording all purchases returned to creditors.

Ø  Sales returns book (returns outwards book) for recording all sales returned by customers.

Ø  Bills Receivable Book to keep a record of bills received from customers.

Ø  Bills payable Book to keep a record of bills payable to creditors.

Ø  Journal Proper to keep a record of those transactions for which there is no separate book.

Basis of Accounting

Cash Basis

Actual cash receipts and payments are recorded.

Credit transactions are not recorded.