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Accountancy
Ahsan ul Haq
14. Cash Discount:When a Customer pays his debts to the proprietor, he allow a discount is called cash discount.
15. Commission:The remuneration of any service rendered by any one is called commission.
16. Expenditure:When any asset is bought or any service is required, the expenditure is paid.
17. Expense:There are two types of expenses, a) Direct & b) Indirect. Direct expense is payable immediately and is
suffered immediately while the indirect expense is payable after a specified period is passed.
18. Account:A summarised record of business transactions is called an account.
19. Debtor (Account Receivable):A person who buy goods from us on credit is our debtor.
20. Creditor (Account Payable):If we buy goods on credit from any person, whole saler or factory, they are our creditors.
21. Assets:Things of value possessed by a trader are called assets.
22. Liabilities:Debts due by the business to its proprietor.
23. Voucher:Any written evidence of transaction is called the voucher.
24. Goods (Merchandise):All the goods which are bought for selling purpose in business is called the merchandise.
25. Stock (Inventory):Goods in hand is called stock.
26. Equity:The rights to properties are called equities. These are capital and liabilities.
Accounting Cycle
It include the whole accounting procedure in which the accounting entries are recorded in a standard way in
any book of account. As mentioned in the following figure, we see the first phase of business is a transaction
and it ends till the balance sheet is completed.
Accountancy
Ahsan ul Haq
Transactions
Balance Sheet
Journal
Final Accounts
Ledger
Trial Balance
Accountancy
Ahsan ul Haq
Accounts
Debit
Credit
Personal Account
Receiver
Giver
Real Account
Comes in
Goes out
Nominal Account
Any Loss/Expense
Any Profit/Gain
Let us evaluate
Now, we have come to know about the rules of debit and credit the accounts, so let us evaluate these
accounts with the help of different examples. Let us look at the following transactions;
Example No.1
Mian Yawar Hussain decided to start a business on 1rst January 2015. Following are his transactions during
the month of January, 2015.
Jan. 1
Rs. 10,000
Jan.3
Rs. 300
Jan.5
Rs. 2,000
Jan.7
Rs. 1,000
Jan.10
Rs. 300
Jan.17
Rs. 150
Jan.20
Rs. 900
Rs. 100
Jan.24
Rs. 50
Jan.26
Rs. 290
Received discount.
Rs. 10
Jan.27
Rs. 185
Jan.30
Rs. 50
Jan.30
Paid rent.
Rs. 100
Jan.30
Paid salaries.
Rs. 500
Jan.31
Rs. 300