• AQIL NAWAZ• MPA• Comsats Attock

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• 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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• 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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• 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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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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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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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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• 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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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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• 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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Goods• Goods are the things which are bought for

resale purpose.• Goods are also called MERCHANDISE.

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• 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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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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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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• 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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• 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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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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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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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

• 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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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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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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• 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

• 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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• ASSETS• LIABILITY• CAPITAL• REVENUE• EXPENSE• These are called 5 elements of accounts

or 5 heads of accounts.

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