Accounting Part1

See discussions, stats, and author profiles for this publication at: https://www.researchgate.
net/publication/329352350
Financial Accounting ……………………. Part 1
Book · December 2018
CITATIONS READS
0 931
1 author:
Saoud Chayed Mashkoor Alamry

Al Muthanna University
193 PUBLICATIONS 0 CITATIONS
SEE PROFILE
Some of the authors of this publication are also working on these related projects:
Curriculum vitae Dr.saoud Ch. Mashkour View project
‫ اﻟﻘﻮاﻧﻴﻦ واﻟﻨﻈﻢ واﻟﻘﻮاﻋﺪ وﻓﻘﺎ ﻟﻤﺪﺧﻞ ﻣﺮاﺟﻌﺔ اﻟﻨﻈﻴﺮ ﺑﺎﻟﺘﺮﻛﻴﺰ ﻋﻠﻰ ﻗﻮاﻋﺪ اﻟﺤﻮﻛﻤﺔ واﻟﺤﻴﻮد اﻟﺴﺪاﺳﻲ‬View project
All content following this page was uploaded by Saoud Chayed Mashkoor Alamry on 01 December 2018.
The user has requested enhancement of the downloaded file.

Accounting ……………………………………. Part 1
ACCOUNTING
IN ENGLISH
Part 1
‫محاسبة باللغة االنكليزية‬
‫الجزء األول‬
Prof.Dr. SAOUD CH. MSHKOOR
Head of
Accounting Department
Al-Muthanna University
First Edition
2011
Dar – Al Dhiya or Printing and Designs
Mobil: 07801000603
Introduction
Accounting is the process of recording, summarizing,

analyzing, and interpreting financial (money related) activities to
permit individuals and organizations to make informed judgments
and decisions. By law all businesses must keep accounting records.
Decisions are based on accounting information for profit and non-
profit companies’ alike.
The objectives of this book are to learn the students on

accounting through the following: Definition of accounting. Name
and explain accounting concept and accounting principles. Explain
the main basics of accounting .Know how to distinguish between
accounting and non accounting transactions. Show how to record
accounting transactions in journal using double entry system .Write
the general rules of journal. Explain how to record transactions in
journal and how to post them to ledger .Explain the main kinds of
subsidiary books and how to record transactions in these books.
Prepare the trial balance. Understand purchasing goods, goods
sales. Explain discounts and accounting treatment for discounts.
Prepare financial accounts .Write letters to suppliers and reply write
letters of customers and reply.
This book of accounting (Part 1) contains twelve chapters as

follow:
- An introduction in accounting
- Recording of accounting transactions
- The journalization
- Posting to the ledger
- Trial Balance
- Discounts, Allowances, Returns
- Subsidiary books
- Commercial papers
- Errors: Classification and Rectification
- Financial Statements
- Commercial Correspondences
- Business activities
I hope that all students and accountants can be find their way
to understand the principles, fundamentals and technical of
accounting.
The Author
2011
Contents
Titles Page
CHAPTER ( 1 ) 11
AN INTRODUCTION
TO ACCOUNTING
1-DEFINITION OF ACCOUNTING
2-FUNCTION OF ACCOUNTING
3-KINDS OF ACCOUTING
4-USERS OF ACCOUNTING INFORMATIONS
5-ACCOUNTING ASSUMPTIONS,PRINCIPLES
AND CONSTRAINTS
CHAPTER( 2) 11
RECORDING
OF ACCOUNTING TRANSACTIONS
1-BUSINESS AND ACCOUNTING
TRANSACTIONS
2-TRANSACTION ANALYSIS
3-DOUBLE ENTRY
4-CLASSIFICATION OF ACCOUNTS
5-BALANCE SHEET EQUATION
6-GENERAL RULES
7- GENERAL RULES OF JOURNAL
CHAPER( 3 ) 11
THE JOURNALIZATION
1-THE JOURNAL
2-EXPLANATION OF THE FORMAT OF JOURNAL
3-INTERESTS OF JOURNAL
4-JOURNALISING
5-KINDS OF ENTRIES
6-CHART OF ACCOUNTS
CHAPTER(4) 11
POSTING TO THE LEDGER
1-DEFINITON OF LEDGER
2-PROCESS OF PREPARING THE LEDGER
ACCOUNTS
3-BALANCING THE LEDGER ACCOUNT
CHAPTER( 5) 11
THE TRIAL BALANCE
1-DEFINITIN OF TRIAL BALANCE
2-METHODS OF PREPARING THE TRIAL BALACE
3-OBJECTS OF TRIAL BALANCE
4-MAIN CHARACTERISTICS AND USES OF A
TRIAL BALANCE
5-LIMITATIONS OF A TRIAL BALANCE
CHAPTER (6) 11
DISCOUNTS,ALLOWANCES
AND RETURNS
1-KINDS OF DISCOUNTS
2-PURCHASES RETURNS AND ALLOWANCES
3-SALES RETURNS AND ALLOWANCES
CHAPTER (7) 11
SUBSIDIARY BOOKS
1-CASH TRANSACTIONS
2-CREDIT SUBSIDIARY BOOKS
CHAPTER( 8) 11
COMMERCIAL PAPERS (NOTES)
1-CHEQUES
2-PROMISSORY NOTE
3-BILL OF EXCHANGE
CHAPTER(9) 11
ERRORS
CLASSIFICATION
AND RECTIFICATION
1-CLASSIFICATION OF ERRORS
2-GENERAL CLASSIFICATIONS
3-RECTIFICATION OF ERRORS
5-SUSPENSE ACCOUNT
CHAPTER (10) 11
FINANCIAL STATEMENTS
1-DEFINITION OF FINAL ACCOUNTS
2-TRADING ACCOUNT
3-PROFIT AND LOSS ACCOUNT
4-BALANCE SHEET
CHAPTER(11) 11
COMMERCIAL CORRESPONDENCES
1-BUSINESSLETTERS:
DEFINITION,FUNCTIONS,QUALITIES
2-CHARACRTRASTICS OF EFFECTIVE BUSINESS
LETTERS
3-PARTS OF BUSINESS LETTERS
4-HOW TO PREPARE YOUR LETTER?
5- CORRESPONDENCES BY INTRNET
CHAPTER (12) 11
BUSINESS ACTIVITIES
1-FORMS OF BUSINESS FIRMS
2-COMMERCIAL AND ECONOMIC ACTIVITIES
3-MARKETING AND DISTRIBUTION ACTIVITIES
4-SHOPS AND STORES
11
APPENDIX (1) : NATURE OF ACCOUNTS
APPENDIX (2):TERMINOLOGY
CHAPTER
(1)
AN INTRODUCTION
TO ACCOUNTING
1-DEFINITION OF ACCOUNTING
2-FUNCTION OF ACCOUNTING
3-KINDS OF ACCOUTING
4-USERS OF ACCOUNTING INFORMATIONS
5-ACCOUNTING ASSUMPTIONS,PRINCIPLES
AND CONSTRAINTS
CHAPTER
(1)
AN INTRODUCTION
TO ACCOUNTING
The main purpose of accounting is to determine profit or loss ( ‫ربح او‬
‫ )خسارة‬a specific period. At every stage of business activity, the
management and owners of a business wants to know whether it has
made a profit or not and whether capital brought in by owners
(‫ )المالكين‬is safe or not .For this purpose, the management must keep
a proper record of all its expenses and revenues(‫)المصروفات وااليرادات‬.
1-DEFINITION OF ACCOUNTING ‫تعاريف‬

‫المحاسبة‬
There are more definitions of accounting
►Accounting
The accounting is a services activity function of which is to
provide quantities information about economic entities.The
Information is primarily financial in nature and is intended to be
useful in making rational economic decisions)‫(قرارات اقتصادية‬.
►Accounting
The accounting is the art of recording, classifying, reporting,
and interpreting )‫ وتفسير‬،‫ تقرير‬،‫تصنيف‬، ‫ (تسجيل‬the financial data of an
organization)‫(منظمة‬.
►Accounting
The accounting is the act of recording, classifying, and
summarizing in a significant manner and in terms of money,
transactions and events which are, in part at least, of a financial
character, and interpreting the results thereof.
►Accounting
The accounting is an information system )‫ (نظام معلومات‬that
processes business transactions)‫ (عمليات تجارية‬to various interested
parties for making business and economic decisions.
►Accounting
The accounting is a social science )‫(علم اجتماع‬has its concepts
and principles that used in applying the accounting cycle ‫(الدورة‬
)‫المحاسبية‬to achieve accounting functions and objectives.
►Accounting cycle ‫الدورة المحاسبية‬
The process of accounting consists (‫ )تتضمن‬the steps involved in

handling(‫ )معالجة‬business transactions completed in an accounting
period, starting with analyzing and recording the transactions in a
journal)‫ (سجل اليومية‬and ending with preparing a post – closing trial

balance)‫(ميزان المراجعة‬.
The accounting cycle can be divided into the following steps:
(1) Analyze transactions from source documents.

(2) Record in journal.
(3) Post to general ledger accounts.
(4) Adjust the general ledger accounts.
(5) Prepare financial statements.
(6)Close temporary accounts.
Figure (1)
The steps of accounting cycle as the following diagram:
No Entry
Business Is this
Analysis of
transaction accounting
transaction
transaction
?
Preparing financial Accumulation and Recording in the

statements summarizing (posting and journal
preparing trial balance)
The accounting is often confused (‫)غالبا ما تشوش‬with book-keeping

(‫(مسك السجالت‬.
► Book-keeping ‫مسك السجالت‬
The Book-keeping is a mechanical process that records the routine

economic activities of business.
The accounting includes book-keeping but goes well beyond

it in scope (‫)غرض‬. Accounting analyzes and interprets financial
information, prepare financial statements. Conduct audits, design
accounting system, and prepare forecasts)‫ (التنبؤات‬and budgets
)‫(الموازنات‬. The accounting process (also called the accounting
cycle) consists of the following groups of functions:-
1- Accounting observes many events and identify and measure

in financial terms those events considered evidence of
economic activity.
2- The evidence events are recorded, classified into meaningful

groups (‫)مجموعات ذات معنى‬, and summarized for conciseness.
3- Accountants report a business activity by preparing financial

statements )‫( قوائم مالية‬and special reports.
2-FUNCTION OF ACCOUNTING ‫وظائف المحاسبة‬
The main Functions of accounting can be given as Follows:
1- The accounting keeps a systematic and permanent record

( ‫(سجل دائم‬of all financial transactions of a business.
2- The accounting keeps a record of revenues and expenses

so that the net results of the business can be quickly
known for any period.
3- The accounting keeps a record of assets and liabilities

projecting the financial position (‫ (الوضع المالي‬of the
business at any moment of time( ‫)لحظة زمنية‬.
4- The accounting protects (‫ (تحمي‬the property of the

business by designing the required system of accounting.
5- The accounting keeps a control on expenses to minimize

the same.
6- The accounting provides Information for meeting various

legal requirements such as filing of returns for sales tax
and for income tax purposes (‫(ضريبة الدخل‬.
2- KINDS OF ACCOUNTING ‫أنواع المحاسبة‬
In general, There are two kinds of accounting:-
1- Financial Accounting ‫المحاسبة المالية‬
It is the process of supplying )‫ (تجهيز‬financial information to parties

external to the reporting entity.
2- Managerial Accounting ‫المحاسبة االدارية‬
It is the process of supplying financial information for internal

management use.
Figure (2)
Accounting system: collection and
processing of financial information about
an organization and reporting of that
information to decision makers.
Financial Accounting External Decision makers:

system: preparation of four Investors, Creditors,
basic financial statements Suppliers, Customers etc.
and related disclosures.
Managerial Accounting Internal Decision makers:

System: Preparation of Mangers throughout the
detailed plans, forecasts, and organization.
performance reports.
The accounting can be also, classified into the following

categories:
A- Financial Accounting ‫المحاسبة المالية‬
B- Cost Accounting ‫محاسبة التكاليف‬
C- Managerial Accounting ‫المحاسبة اإلدارية‬
D- Government Accounting ‫المحاسبة الحكومية‬
E- Tax Accounting ‫المحاسبة الضريبية‬
This classification can be distributed between two main categories

of accounting according the following diagram:
Figure (3)
Accounting
Financial Accounting Managerial Accounting
External Users of Internal Users of

Accounting Information Accounting Information
Manageme Employe
Investors Creditors nt es
Customer Taxing
Authoriti
s es
Author
ites
4-USERS OF ACCOUNTING
INFORMATIONS ‫مستخدمو البيانات المحاسبية‬
There are many potential users of accounting information, including
shareholders, lenders, customers, suppliers, government
departments, employees and their organizations, and society at
large. Anyone with an interest in the performance and activities of
an organization is traditionally called a stakeholder.
For a business or organization to communicate its results and

position to stakeholders, it needs a language that is understood by
all in common. Hence, accounting has come to be known as the
"language of business".
The different users of accounting information can be classified as

follow:-
Shareholders ‫المساهمين‬
Investors ‫المستثمرين‬
Creditors ‫الدائنين‬
Government ‫الحكومة‬
Labors ‫العاملين‬
Researchers ‫الباحثين‬
General public ‫الجمهور العام‬
Management(Administration) ‫اإلدارة‬
5-ACCOUNTING ASSUMPTIONS,PRINCIPLES AND

CONSTRAINTS ‫الفروض والمبادئ والمحددات المحاسبية‬
In the most modern classification of accounting concepts
and principles in the world, accounting principles can be classified
as follow:
Assumptions Principles Constraints

(Concepts)
‫المبادئ‬ )‫المحددات(القيود‬
)‫الفروض(المفاهيم‬
♦ Economic entity ♦Historical cost ♦Materiality
♦going – concern ♦Matching ♦Conservatism
♦unit of measurement ♦Revenue ♦Consistency

Recognition
♦periodicity ♦Cost & Benefit
(continuity) ♦Full disclosure
♦Substance Over
♦Dual Aspect (Double ♦Objectivity Form
Entry)
A-Accounting Concepts (Assumptions) ‫الفروض‬

‫المحاسبية‬
Accounting Concepts refer to the nature of economic environment

in which accounting operates. The most significant of these
concepts (assumptions) are:
1-The Economic entity concept ‫مفهوم الوحدة االقتصادية‬
2- The going – concern concept ‫مفهوم االستمرارية‬
3- The unit of measurement concept ‫مفهوم وحدة القياس‬
4-The periodicity concept ‫مفهوم الدورية‬
5-Dual Aspect (Double Entry) Concept )‫المفهوم المزدوج (القيد المزدوج‬
These concepts are essential to the understanding of

accounting principles and distinguish between the assumptions and
principles.
1- Economic entity (Business entity) ‫الوحدة االقتصادية‬
Business entities are separate economic units that control

resources and obligations and that have separate and distinct
records.
For accounting purposes, every business is conceived to be

and treated as a separate entity, separate and distinct from its owner
and from every other business.
Also the economic entity can be defined as any legal or unit

accounting that has control over resources, accepts responsibilities
for making and carrying out commitments, and conducts economic
activity, such a corporation or a consolidated group.
2- Going Concern (continuity) concept ‫مفهوم‬

‫االستمرارية‬
There is an assumption that a particular business

enterprise will continue in existence for a long enough period of
time to carry out its objectives and commitments (the life is
indefinite).
3- Monetary Unit Concept ‫مفهوم الوحدة النقدية‬

The monetary unit of a country means that the money
is used to measure the asset)‫ (الموجودات‬, liabilities )‫ (المطلوبات‬, and
owner’s equity (‫)حقوق الملكية‬and to measure the changes that occur in
them as a result of these changes, the net income of accounting
entity is measured and determined for a specific period of time.
Stable monetary unit concept means that purchasing power

(‫ )القوة الشرائية‬of the unit of measure used in accounting does not
change; this is not practically accepted since the accounting
information provided is not relevant ( ‫)مالئمة‬.
4- Accounting periods (Periodicity) concept

‫مفهوم الدورية‬
The Periodicity concept assume that the business enterprise has an

indefinite life .The measurement of the enterprise’s financial
condition and operations must be made a relatively short intervals
such as quarterly or yearly.
The life of a business enterprise is divided into period’s equal

length, such as a month, three months, or a year; annual accounting
periods are the most common.
Under this assumption, the accounting periods with equal

length allow for comparison of expenses, revenues and income
earned by the business in one period with the same in another
period.
5- Dual Aspect(Double Entry) ‫مفهوم القيد المزدوج‬
Dual aspect means double aspect that means all

transactions are recorded as having the debit aspect and the credit
aspect.
B- Accounting principles ‫المباديء المحاسبية‬
Accounting principles are broad rules (‫ )قواعد واضحة‬adopted

by the accounting profession as guides for use in recording and
reporting the financial affairs and activities of a business to its
owners, investors, creditors, and other outsiders.
Generally Accepted Accounting Principles (GAAP)

‫ المباديء المحاسبية المقبولة قبوال عاما‬refers to conventions, rules, and
procedures necessary to define accepted accounting practice at a
particular time. The authority of these principles depends on their
general acceptance by the accounting profession. Accounting
principles are:
1-Historical cost principle ‫مبدأ التكلفة التاريخية‬

The assets are recorded at their acquisition cost and are
usually not adjusted for increases in value until a sale has occurred.
The accounting rule requires assets and services plus any resulting
liability to be taken into the accounting record at cost.
2-Matching principle ‫مبدأ المقابلة‬
The expenses must be offset against the revenues earned in

the period. Thus, expenses of the period are matched against the
revenues of the same period, and the result is net income or loss for
the period.
The accounting rule shows that all expenses incurred in

earning revenue are deducted from the revenue in determining net
income.
3-Revenue Recognition principle ‫مبدأ تحقق االيراد‬

Revenue is recognized for accounting purposes when it is
realized. For the vast majority of enterprises revenue is realized
when the sale occurs.
The accounting rule defines revenue as an inflow of assets,

not necessarily cash, in exchange of goods and services and
requires the revenue to be recognized at the time, but not before, it
is earned.
4-Full disclosure principle ‫مبدا اإلفصاح التام‬
All information that can be useful to informed decision

makers must be disclosed. All material information should be
disclosed in the financial statements to make these statements clear
and understandable to the readers of these statements.
5- Objectivity principle ‫مبدا الموضوعية‬
The accounting rule requiring that wherever possible the

amounts used in recording transactions based on objective evidence
(for example: sales invoice) rather than subjective judgments.
C-Accounting Constraints ‫المحددات(القيود) المحاسبية‬
1-Materiality ‫األهمية النسبية‬
The Materiel information must be given more attention than

immaterial. Immaterial items should be combined with other items.
Materiality relates to an item’s impact (‫ )يؤثر‬on a firm’s

overall financial condition and operations. An item is material when
it is likely to influence the decision of reasonably prudent investor
or creditor.
2-Conservatism (Prudence) ‫الحيطة والحذر او التحفظ‬
The conservatism considers that accountants should be

conservative in their estimates )‫ (تقديرات‬and opinions and in their
selection procedures, choosing those that neither understate nor
overstate situation. The rule of Cost or Market Price whichever is
lower )‫(سعر السوق او التكلفة ايهما اقل‬for inventory valuation is a good
example on applying this constraint.
3-Consistency ‫االتساق او الثبات‬
The consistency implies that once an accounting

method used must not be changed from period to period. This
convention ) ‫ (عرف‬is necessary used for proper comparison.
Using the same method for providing depreciation or using

the same method for inventory valuation from period to period is
good example on this constraint.
4- Cost and Benefit ‫التكلفة والمنفعة‬
All the accounting information must be established

according to its cost and their future benefits.
5- Substance over Form ‫الجوهر فوق الشكل‬
The accountant must be taken the substance of the things

and not their forms.
SUMMARY
The conceptual framework of accounting:
1-Accounting: A system that collects and processes (analyzes,

measures, and records) financial information about an organization
and reports that information to decision makers.
►Accounting: is the language of business. It is a standard set of

rules for measuring a Firm’s financial performance. Assessing a
company’s financial performance is important for many groups,
including:
➢ the firm’s officers (managers and employees)
➢ Investors (current and potential shareholders)
➢ Lenders (banks)
➢ General public
►What is accounting?
♦The language of business.
♦A means to communicate financial information.
♦A way to convey information about a business to users.
2-Book-Keeping: Keeping is an art of recording business

transaction in a set of books.
3-Accounting cycle: is the record keeping process used during and

at the end of accounting period that results in financial statements.
4-Assumptions, Principles, Constraints

Assumptions Principles Constraints
Economic entity Cost Materiality
going – concern Matching Conservatism
unit of measurement Revenue Consistency

recognition
periodicity Cost & Benefit
(continuity) Full disclosure
Substance Over Form
Dual Aspect(Double Objectivity
Entry)
Test Questions
1- Define the following:-
a. Accounting.
b. Accounting cycle.
c. Continuity (going-concern).
d. Cost principle.
e. Monetary unit of measurement.
f. Conservatism.
2-Give two scientific definitions for the accounting, and name only
the assumptions and principles accounting.
3-Name the accounting concepts and explain two from them.
4-Name the accounting principles and explain two from them.
5-Explain the functions of accounting.
6-State whether each of the following statements are true or false.
a. Book- keeping is an art of recording financial transactions in
a set of books.
b. The main objective of book- keeping is to keep permanent
records of business transactions.
c. Preparing of account does not require specific skills and
knowledge (‫) مهارات ومعرفة‬.
d. The accounting keeps a control on expenses to maximize the
same.
7-State whether each of the following statements are true or false.
a. Accounting is a language of business.
b. Accounting principles are referred to as rules of action on
conduct.
c. Assets are always valued at market price as per the basis of

the going concern concept.
d. As per the convention of disclosure, all material information
should be disclosed by the accountants.
8-The time period assumption states that:
a. Revenues should be recognized in the accounting period in
which it is earned.
b. Expenses should be matched with revenues.
c. The economic life of a business can be divided into artificial
time periods.
d. The fiscal year should be corresponds with the calendar
year.
9-The principle that dictates that efforts (expenses) be matched with

accomplishments (revenues) is the:
a. Matching principle.
b. Cost principle.
c. Revenue recognition principle.
d. Full disclosure principle.
10-Accounting includes:
a. Measurement
b. Verification
c. Reporting
d. All of the above
11-All of the following represents outside party that interest in

accounting reporting except:
a. Management.
b. Debtors
c. Creditors.
d. Taxation authorities.
12-The Company opens drawings and capital account as an

application entity assumption (concept).
a. Continuity
b. Periodicity
c. The entity
d. The unit of measurement
13-All costs paid to buy a car to make ready for intended use, is an
application of:
a. Revenue recognition principle.
b. Continuity Concept.
c. Full-disclosure principle.
d. Cost principle.
14-Using the accounting procedures from year to year means:

a. Conservatism
b. Matching
c. Consistency
d. Materiality
15-All material information should be disclosed in the financial

statements to make these statements clear and understandable for
the reader is:
a. Materiality
b. Consistency
c. Matching
d. Full disclosure
16-Answers of some previous questions in chapter (1):

Question a b c d
Number
6 true false false false
7 true true false true
8 x
9 x
10 x
11 x
12 x
13 x
14 x
15 x

CHAPTER
(2)
RECORDING
OF ACCOUNTING TRANSACTIONS
TRANSACTIONS
2-TRANSACTION ANALYSIS
3-DOUBLE ENTRY
4-CLASSIFICATION OF ACCOUNTS
5-BALANCE SHEET EQUATION
6-GENERAL RULES
CHAPTER
(2)
RECORDING
OF ACCOUNTING
TRANSACTIONS
TRANSACTIONS
‫المعامالت التجارية والمحاسبية‬
Business transaction is defined as an exchange of goods,
services, money between two or more parties.
Any business transaction is an accounting transaction if:
(1)There is a real exchange between two parties.

(2) There is an effect for this transaction on any of the
elements of accounting: assets liabilities, and / or owner's
equity.
Accounting transactions are recoded using entries in
accounting Journal )‫ (سجل اليومية‬, the process is called journalization
) ‫( التسجيل في اليومية‬. The general procedure is to record revenues and
expenses as they arise from external transaction (i.e. Dealing with

outsiders and transfer of assets and liabilities to / or from the firm).
Transaction analysis )‫(تحليل المعاملة‬is first step to identify the

type of account involved and then to determine whether a debit or a
credit (‫ )المدين او الدائن‬to the account is required, and then prepare the
journal entry ( ‫(قيد اليومية‬.
2-TRANSACTION ANALYSIS ‫تحليل المعاملة‬
Transaction Analysis is the process studying a transaction to

determine its economic effect on the business in terms of the
accounting equation )‫(المعادلة المحاسبية‬.
Apply transaction analysis to analyze simple business

transactions in terms of the accounting model:
Assets = Liabilities + Stockholder's Equity
(1)Every transaction affects at Least two accounts (duality of

effects) : it is critical to identify correctly the accounts affected and
the direction of the effect (increase or decrease). ‫زيادة او نقصان‬
(2)The accounting equation must remain in balance after each
transaction.
3-DOUBLE ENTRY ‫القيد المزدوج‬
Double- Entry accounting is an accounting system in which

each transaction affects and is recorded in two or more accounts
with equal the debits and credits.
An account is an individual accounting record of increases

and decreases in a specific asset, liability, or owner's equity item.In
order to identify the debit and credit, there are two approaches:
A- Traditional approach ‫المفهوم التقليدي‬
The Traditional approach is based on the concept of

“Personification ")‫(الشخصنة‬. It deals with the accounts receiving
benefit is debit and the account which issues benefit is credit, in
other words! The Debit is the receiver and the credit is the giver.
) ‫(المدين هو االخذ والدائن هو العاطي‬
4-CLASSIFICATION OF ACCOUNTS ‫تصنيف‬

‫الحسابات‬
Accounts are classified into three groups as under:

► Personal accounts ‫الحسابات الشخصية‬
► Real accounts ‫الحسابات الحقيقية‬
► Nominal accounts ‫الحسابات االسمية‬
1-Personal accounts ‫الحسابات الشخصية‬

Personal accounts are defined by personal names including
all types of economic entities such as corporations, Firms ,
universities… etc.
(a) Ali’s account ( A/c ) .
(b) Al-Muthana university ( A / c ) .
(c) Customers of credit sales (debtors) .
(d) Suppliers of credit purchases (Creditors) .
2- Real accounts ‫الحسابات الحقيقية‬
Real accounts are the assets accounts either tangible

)‫(ملموسة‬or intangible )‫ )غير ملموسة‬assets.
Examples: Cash, Building, furniture, land.
3-Nominal accounts ‫الحسابات االسمية‬
Nominal accounts are the accounts of revenues, gains,

expenses, losses. At the end of the accounting period nominal
accounts are closed in final accounts)‫ (الحسابات الختامية‬:
Trading account)‫ (حساب المتاجرة‬, profit and loss account ‫(حساب‬
) ‫ارباح وخسائر‬, or income summary) ‫(ملخص الدخل‬.
Examples
(1)Sales (A/c) .
(2)Purchases ( A/c).
(3)Utilities (A/c).
(4)Rent (A/c).
(5)Losses from selling a fixed asset (A/c) .
B- Modern approach ‫المفهوم الحديث‬
This approach of double entry for identifying the debit

account and credit account according to the following rules
concerning the components ( elements ) of accounting
equation ( Balance sheet equation ) :
Assets = Liabilities + owner's equity
Assets represent uses (applications) of funds while equities

(liabilities and owner's equity) represent sources of funds. For every
use of fund there is a source of fund.
5-BALANCE SHEET EQUATION ‫معادلة الميزانية‬

Owner’s equity is defined as the difference between a
business entity assets and liabilities.
The definition of owner's equity can be stated in the

following equation:-
Assets – Liabilities = Owner’s Equity (capital)
Expenses decrease and revenue increase Owner’s equity.

Thus profit increase capital and loss decrease capital. The Owner's
equity can be represented in the following equation:-
Owner's Equity = Total liabilities – Creditors

Owner's Equity can also be expressed as proprietor’s funds.
Proprietor’s funds = (Fixed assets+ Stock+ Liquid Assets) –
(Current Liabilities) .
Or
Owner's Equity= Capital + Retained earnings + Reserves and

Surplus.
The same can be expressed in terms of an equation:-
C=A-L
Where:-
C = capital, A = Assets, L = Liabilities
Thus
C+L=A
A=C+L
The above equations can further be explained as follows:-
Capital+ Liabilities + Revenue = Assets+ Expenses
6-GENERAL RULES ‫قواعد عامة‬
1-Assets
(1)All assets accounts normally have debit balances.
(2)An increase in an asset is recorded on the left (debit) side of the

account.
(3)A decrease in an asset is recorded on the right (credit) side of the

account.
Any Asset Account
Dr Cr.
Increase Decrease
2. All liabilities and Owner's Equity

(1)All liability and owners' equity accounts have credit balance.
(2)An increase in a liability or an owner’s equity is recorded on the

right (credit) side of the account.
(3)A decrease in a liability or an owner’s equity is recorded on left

(debit) side of the account.
Any liability account

or owner’s equity account.
Dr. Cr.
Decrease Increase
Summary statement of the rules of debit and credit:
Assets Accounts liabilities and owner’s Equity

Accounts
- Increases are recorded by debit - Increases are recorded by
sides. credit sides.
-Decreases are recorded by - Decreases are recorded by
credit sides. debit sides.
The following exercises illustrate the above cases:
Exercise (1)
AL- Quds Company decided to purchase a building for

ID100000000 (building is an asset since it is a use of fund) through
a source of fund:
1- Paid the price cash or by check draw on the current account

in the bank.
2- Borrowed from a bank.
3- Promised to pay in the future, i.e. on credit which means
there is a new liability.
4- Signed a promissory note to pay the amount in the future.
The following shows the effect on balance sheet equation:
Assets = liabilities + owner's equity
(1)+ Building - cash = No effect

(2) + Building = + loan from bank
(3)+ Building = + accounts payable
(4)+ Building = + Notes payable
We debit building account since assets are increased by the

value of the building and:
1- Cash (A/c) is credited since cash (asset account) is

decreased.
2- Loan (A/c) is credited since loan (liability account) is
increased. As a source of financing.
3- Accounts payable is credited since it is increased as a

liability account.
4- Notes payable for same reason showed in (3) above.
Here the journal entries for the four cases of financing the
process of purchase a building:
(Amounts in thousands)
1: Dr Building A/c 100000
Cr Cash A/c 100000
Cr Bank's loan A/c 100000

Cr Accounts Payable A/c 100000
Cr Notes payable A/c 100000

The following table summarizes the debit and credit rules on
the affected accounts:
Category Increase Decrease

Assets Debit Credit
Liabilities Credit Debit
Capital Credit Debit
Expenses & Losses Debit Credit
Revenues & gains Credit Debit
Exercise (2)
Mustafa started his business by the following transactions
(Amounts in Thousands) :-
1- Capital invested by Mustafa IDs 100000, cash.

2- Purchased land for IDs 15000, cash.
3- Purchased furniture from Suhail for ID 900, on
account.
4- Paid for sundry expenses IDs 270.
5- Purchased Merchandise for IDs 3400, from Al-
Amanah Company, and paying IDs 1400 in cash.
6- Received cash as commission IDs 70.
7- Sold goods to Zuher on account IDs 2650.
Required:
Use accounting equation to show their effects on

assets, liabilities and capital.
Solution: Accounting Equation ( Amounts in Thousands )

Liabilities
+ owner's equity
Assets
No. Explanation
Account Account Mustafa

Cash Land Fur- Goods receivable Payable capital
niture
1 Capital invested cash + 100000 + 100000
2 Purchased land cash (-) 15000 + 15000
Balances 85000 15000 100000

3 purchased furniture on + 900 + 900
account
Balances 85000 15000 900 900 100000

4 Paid Sundry expenses (-) 270 (-) 270
Balances 84730 15000 900 + 3400 900 99730

5 Purchased Merchandise (-) 1400 + 2000
for cash and on account
Balances 83330 15000 900 3400 2900 99730

6 Received cash as commission
+ 70 + 70
Balances 83400 15000 900 3400 2900 99800

7 Sold goods on account (-) 2650 + 2650
83400 15000 900 750 2650 2900 99800

Total
Assets = Liabilities + Owner’s equity

Total Assets =Total Liabilities
(83400 + 15000 + 900 + 750 + 2650) = 2900 + 99800
102700 = 102700
Exercise (3)
Sep 1: Amar had opening his services office by brought ID 50000

cash( Amounts in Thousands ) .
Sep 10: he had a Loan from the bank of investment ID 20000, and
deposited it in his account.
Sep 12: bought furniture for ID 13000 and paid the sum cash.
Sep 15 : provided services to clients for cash ID 3000 .
Sep 19 : bought stationery from Muthana Trading for ID 250 on
credit .
Sep 20: amount ID 200 paid to ALMuthana Trading .
Sep 21 : performed services to AL-Warkaa' stores for ID 2500 ,
collection ID 1500 cash .
Sep 22: paid by check ID 800 for office space rent.
Sep 26: ID 500 another amount collected from AL-Warkaa' stores.
Sep 30: drew ID 400 cash for person use.
Required:
Prepare tabular summary of the transactions.
Solution:
Accounting Equation (Amounts in Thousands)
N0 Explanation Assets Liabilities + owners equity
Cash Bank Furniture stationery Account Loan Accounts AMAR'S

receivable payable Capital
1 Capital invested +50000 + 50000

cash
10 Loan from bank deposit +20000 + 20000
In account
Balances 500000 20000 20000 50000
12 Bought furniture cash (-)13000 +13000
Balances 37000 20000 13000 20000 50000

15 Provided services cash+3000 + 3000
Balances 40000 20000 13000 20000 53000

19 Bought stationery on + 250 + 250
Credit from
AlMuthana Trading
Balances 40000 20000 13000 250 20000 250 53000
20 Paid cash to (-) 200 (-) 200
AlMuthana Trading
Balances 39800 20000 13000 250 20000 50 53000
21 Performed service to + 1500 + 1000 + 2500
AL-Warkaa' on
cash on credit
Balances 20000 13000 250 1000 20000 50 55500
23 Paid the rent by check (-) 800 (-) 800
Balances 41300 19200 13000 250 1000 20000 50 54700

26 Amount collected from+ 500 (-) 500
AL-Warkaa'
Balances 41800 19200 13000 250 500 20000 50 54700
30 Drawings cash for (-) 400 (-) 400
Personal use
Total 41400 19200 13000 250 500 20000 50 54300
Assets = Liabilities + Owner’s equity

Total Assets =Total Liabilities
(41400 + 19200 + 13000+ 250 + 500) = 20000 + 50 + 54300
74350 = 74350
SUMMARY
(1)Transaction
Transaction is an exchange between a business and one or
more external parties.
(2) Transaction
Transaction is a measurable event internal to a business, such
as adjustments for the use of assets in operation.
(3)Transaction Analysis
Is the process of studying a transaction to determine its
economic effect on the business in terms of the accounting
equation.
Apply transaction analysis to analyze simple business

transactions in terms of the accounting model:
Assets = Liabilities + Stockholder's Equity

1-Every transaction affects at Least two accounts (duality of

effects): it is critical to identify correctly the accounts affected and
the direction of the effect (increase or decrease)
2-The accounting equation must remain in balance after each

transaction.
The followings are the main principles of double entry

system:-
- Every transaction has two sides.
- One account is the receiver of benefit.
- Other account is the given of benefit.
(4)Debits and credits

Debit is the name for the left side of an account .Debits
represents increases in assets and decreases in liabilities and
stockholder's equity. Credit is the name for the right side of an
account. Credits represent decreases in assets and increases in
liabilities and stockholder's equity.
(5)Business transaction
An activity which involves money or money's worth is
known as a "transaction" something having value is received, and
something having value is given out (e.g. Bought furniture for cash ).
(6)Journalization
Entering the business transaction in the journal is called
journalizing.
Test Questions
1-lnterest expense is an example on ……….. Accounts.
a. real.
b. personal.
c. nominal.
d. all of the above.
2-lf a company purchased building cash:

No. Assets Liabilities Owner’s equity
a Increase Increase -------
b Increase -------- Increase
c Increase ---------- ---------
Decrease
d ---------- Increase Decrease
3-Business transaction is an accounting transaction if:
a. It effects on balance sheet elements.

b. There is a real exchange with outside party.
c. Both (a) and (b) .
d. Neither (a) nor (b).
4-if an engineering office rendering a service on credits this:
No. Assets liabilities owner’s equity
a ------- Increase Increase

b Increase Increase -----------
c Increase --------- Increase
d decrease --------- Decrease
5-Office supply is ….. Accounts.

a. an expense
b. an asset
c. a liability.
d. a revenue.
6-When a computer is purchased on credit we debit:

a. Accounts receivable.
b. Cash.
c. Accounts payable.
d. Computer
7-When we record the entry:
Marketable securities A/c Dr. xxx

To capital A/c Cr xxx
a. Marketable securities are purchased.

b. Marketable securities are sold.
c. Starting a new business by Marketable securities or Increase
the capital by that amount.
d. Marketable securities is exchanged by bonds
8-When the owner drew goods for his personal use at cost we
credit:
a. Drawings A/c
b. sales A/c
c. purchases A/c
d. capital A/c
9-We debit ….. Account when we repay the loan.
a. Loan
b. interest expense
c. cash
d. capital
10-Credits:
a. Increase both assets and liabilities.

b. Decrease both assets and liabilities.
c. Increase Assets and Decrease liabilities.
d. Decrease assets and Increase liabilities.
11-All the following account have credit normal balance except:
a. Revenues.
b. Liabilities.
c. Gains.
d. Losses.
12- Abdel Razak had the following transactions. Use accounting

Equation to show their effect on his assets, liabilities and capital
(Amounts in Thousands):
(1)Invested ID 250000 cash.
(2)Purchased equity shares of Baghdad limited for cash ID 20000.
(3)Purchased land and buildings for ID 25000 paying ID 5000 in
cash and the balance through a loan.
(4) Sold shares of Baghdad Limited Co. costing ID 5000 for ID
6000.
(5) Purchased a secondhand car for ID 5000 cash.
(6) Paid cash as commission ID 500.
(7) Paid cash ID 1000 for loan and ID 50 for interest.
(8) Paid cash for sundry expenses ID 200.
(9) Received dividends ID 100.
13-Prepare a Balance sheet Equation in table with columns for
each of the following transactions:
1.Started business with IDs 10000000.
2.Deposited IDs 5000000 into bank.
3.Purchased goods for IDs 4000000.
4.Purchased (on credit) goods of IDs 8000000 from
Mahmud.
5.Sold goods for IDs 8000000.
6.Paid rent IDs 500000.
7.Received interest IDs 50000.
8.Bought (on Credit) Furniture of IDs 500000 from Ibrahim.
9.Withdrew IDs 50000 (from office cash) for personal use.
10.Returned Furniture of IDs 100000 to Ibrahim.
14- Prepare a table with columns headed (1) Personal (2) Real
(3) Nominal from the following accounts:-
(1) Bassrah Oil Company (2) Machinery (3) AL-Rasheed
Hospital (4) Building (5) Advertising (6) Electricity charges
(7) Land (8) Stationery (9) Salaries (10) Interest.
15- State with the help of a table which A/c should be debited
and which A/c should be credited :- (with reasons) .
A. Started Business with IDs 30000000.
B. Opened Bank A/c by depositing IDs 200000.
C. Purchased Machinery for IDs 5000000.
D. Paid for office stationery IDs 50000.
E. Bank collected interest on our investment IDs 400000.
F. Paid rent IDs 100000 to landlord.
G. Sold goods worth IDs 1000000.
H. Cash purchases IDs 3000000.
I. Cash withdrew for personal use IDs 100000.
16- State which account should be debited and which account

should be credited from the following transactions:-
A. Paid by cheque to Rahim IDs 1500000.
B. Cash withdrawn from the Bank IDs 750000.
C. Received cheque from Mohammed IDs 900000.
17- State whether the following statements are “True” or “

False" Give reasons":-
l. Real A/c is debited when something is going out from the
business.
2.Nominal A/c, is A/c of a person.
3.Depreciation A/c is a nominal A/c.
4.Goodwill A/c is a real A/c.
5.Outstanding wages A/c is a nominal A/c.
6.Buildings A/c is a personal A/c.
7.Advertisement A/c is a nominal A/c.
8.Debtor's A/c is a real A/c.
9.Bad debts A/c is a personal A/c.
10. Printing and stationery A/c is a nominal A/c.
18- What is meant by double entry book-keeping system? Explain

the advantages of double entry book-keeping system.
19-Discuss the classification of an account and write an explanatory
notes on (1) personal A/c (2) Real A/c (3) Nominal A/c .
20-Explain the rules of journalisation for debiting and crediting the

personal A/c, Real A/c and nominal A/c.
21-Answers of some previous questions in chapter ( 2 ) :
Question a b c d
Number
1 x
2 x
3 x
4 x
5 x
6 x
7 x
8 x
9 x
10 x
11 x

CHAPER
(3)
THE JOURNALIZATION
1-THE JOURNAL
2-EXPLANATION OF THE FORMAT
OF JOURNAL
3-INTERESTS OF JOURNAL
4-JOURNALISING
5-KINDS OF ENTRIES
6-CHART OF ACCOUNTS
CHAPER
(3)
THE JOURNALIZATION
‫التسجيل في اليومية‬
The last chapter was explained how to analyze and record the
accounting transactions in the accounting equation; this chapter will
emphasize on book keeping in general.
Book keeping is the record - making phase of accounting.

Book keeping is an art of recording and summarizing.
1-THE JOURNAL ‫اليومية‬
What is the journal?

A business transaction is analyzed and classified according to
the rules of debit and credit. After such classification each
transaction is recorded in a book of accounts known as "Journal".
It is an important book of accounts. It is a book of daily records.
As the transactions take place, they are first recorded in a rough
book or waste book. In short, Journal is written on the basis of
information recorded from the waste book. The word journal is
derived )‫ )مشتقة‬from a Latin word "jour" means a day . Business
transactions are first entered in this book and subsequently )‫)وبالتتابع‬
they are posted (‫ )ترحل‬to another book known as ledger.
The Format of Journal is given below

Particulars Voucher Ledger Debit Credit
Date No Folio (Dr) (Cr)
IDs IDs
Date of the Name of the A/c Dr xx

Transaction To Name of the A/c xx
(Being……………….)
2-EXPLANATION OF THE FORMAT OF

JOURNAL
‫شرح نموذج اليومية‬
( 1 ) Date Column ‫حقل التاريخ‬
The dates of the transactions must be written in the first

column of the journal.
( 2 ) Particulars Column ‫حقل البيان‬
The names of the accounts to be debited and credited are

written in the particulars column.
(3) Voucher Number ‫حقل رقم المستند‬
The number of the source document is written in the Voucher

Number column.
( 4 ) Ledger Folio ‫رقم سجل األستاذ‬
It refers to the page number of the ledger in which Journal

has been posted.
( 5 ) Debit Amount Column ‫حقل المبلغ المدين‬

In this column, the amount of transaction is written against
the name of the account to be debited "Dr”.
(6) Credit Amount Column ‫حقل المبلغ الدائن‬

In this column, the amount of the transaction is written
against the name of the account to be credited.
►Debits and credits

The terms debit (Dr) and credit (Cr) mean left and right respectively.
The act of entering an amount on the left side of the account

is called debiting the amount and making an entry on the right side
is crediting the account.
(7) Narration ‫شرح القيد‬

It refers to the reason for recording the journal. It is written
after entering the journal entry.
3-INTERESTS OF JOURNAL ‫فوائد سجل اليومية‬
A Journal is needed for the following reasons:-

(1)The Journal has a great utility to various interested users,
because it provides complete, accurate, date wise permanent
records of business transactions with different parties on
every day.
(2)In the Journal, information is noted date wise systematically,
which is useful to find out reference of transactions easily
and immediately by the concerned party.
(3)The Journal is written on the basis of waste book and
different source documents. Narration is written below the
entry which is useful for understanding the nature of business
transactions.
(4)By referring ledger folio, the businessman can find out the
reference of a particular Ledger account.
(5)When business information is recorded systematically in the
Journal, ledger can be written easily.
(6)From the legal point of view also, a Journal becomes
necessary. Courts ( ‫ )المحاكم‬recognize the Journal as an
evidence (‫ )دليل اثيات‬in approving or disapproving claims e.g.,

If there is a fire in the stores (‫ )مخازن المواد‬and insured goods
are lost by fire, insurance company or court decides the claim
amount on the basis of information noted in the Journal.
(7)With the help of the Journal and ledger, cross-checking of
the business transactions, can be done. It helps to locate (‫)يحدد‬
and prevent (‫ )يمنع‬errors.
4-JOURNALISING ‫التسجيل في سجل اليومية‬
Process of recording the business transactions in the Journal

is known as Journalizing,
Steps to be followed for Journalizing:-
(1)First read the transaction carefully. Find out the accounts
involved in the transaction.
(2)Ascertain (‫ )حدد‬the types of those accounts. Apply (‫ )طبق‬the rules
of debit and credit.
(3)Write down the date of the transaction in the date column. In
particulars column, name of the A/c to be debited is written on the
first line. The word Dr" is to be written against the name of the A/c
to be debited and the word "To" is to be written proceeding THE
name of the A/c to be credited.
(4)Write down the amount in figures in debit column and credit
column, write down the brief explanation of the transaction in the
brackets in particular column after the entry. Such explanation ‫توضيح‬
)‫ )او شرح‬is called narration.
(5)After the narration a line should be drawn.
Exercise (1)
Analyze the following transactions and record them in the

Journal:-
(1) 1-1-2010 IDs 5000000 received from Ahmed as loan to start
business.
(2) 2-1-2010 Deposited IDs 5000000 in the Bank.
(3) 5-1-2010 Purchased of furniture for IDs 500000 on credit
from Mr. Salam Co.
Solution:
Analysis (1)
Accounts Amount
Date affected Nature of Debit or Rule applicable IDs
Account Credit
1-1-2010
Cash A/c Real Debit Debit what comes in 5000000
Ahmed's loan A/c Personal Credit Credit The giver 5000000

Recording in the Journal
Date Particulars L.F. Debit Credit

IDs IDs
1-1-2010 Cash A/c Dr. 5000000
To Ahmed's Loan A/c 5000000
(Being Cash received from Mr. Ahmed as
loan)
Analysis (2)
Date Accounts Nature of Debit or Rule applicable Amount

affected Account Credit IDs
2-1-2010 Bank A/c Personal Debit Debit the Receiver 5000000
Cash A/c Real Credit Credit what goes out 5000000

IDs IDs
2-1-2010 Bank A/c Dr. 5000000
To Cash A/c 5000000
(Being Cash deposited in the Bank)
 Analysis (3)
Date Accounts affected Nature of Debit or Rule applicable Amount
Account Credit IDs
5-1-2010 Furniture A/c Real Debit Debit what comes in 500000

Mr. Salam Co. Personal Credit Credit the giver 500000

IDs IDs
5-1-2010 Furniture A/c Dr. 500000
To Mr. Salam Co. A/c 500000
(Being Furniture purchased on credit from Mr.
Salam Co.)
Exercise (2)
Journalize the following transactions in the books of Ali.
1-1- 2010 Started business with IDs 10000000.
2-1-2010 Deposited in the BankIDs 2000000.
3-1-2010 Bought goods for cash IDs 1900000.
4-1-2010 sold goods for IDs 500000.
5-1-2010 Ali had taken goods worth IDs 100000 for his private use.
6-1-2010 Received from Khalid IDs 475000 in full settlement of
IDs 485000.
7-1-2010 Paid for sundry expenses IDs 50000.
8-1-2010 Paid to Mahmud IDs 1000000 in full settlement of IDs

1020000.
9-1-2010 Paid for insurance IDs 175000.
10-1-2010 Cash sales IDs 1000000.
Solution:
The Journal of Ali
Date Particulars L.F Debit IDs Credit IDs
2010 Cash A/c Dr 10000000
Jan 1 To Capital A/c 10000000
(Being the cash invested into the
business)
2 Bank A/c Dr 2000000
To Cash A/c 2000000
(Being the cash deposited into the bank)
3 Purchases A/c Dr 1900000
To Cash A/c 1900000
(Being the goods bought for cash)
4 Cash A/c Dr 500000
To Sales A/c 500000
(Being the goods sold for cash )
5 Drawings A/c Dr 475000
To Purchases A/c 475000
(Being the goods withdrawn from
business
Discount A/c Dr 10000
To Khalid's A/c 485000
(Being the cash received and discount
allowed)
7 Sundry Expenses A/c Dr 50000
To Cash A/c 50000
(Being the expenses paid in cash)
8 Mahmud A/c Dr 1020000

To Cash A/c 1000000
To Discount A/c 20000
(Being the amount paid and discount
received)
9 Insurance premium A/c Dr 175000

To Cash A/c 175000
(Being the insurance premium paid on
property)
10 Cash A/c Dr 1000000
To Sales A/c 1000000
(Being the goods sold for cash)
TOTAL 17230000 17230000
Exercise (3)
Journalize the following transactions in the Journal

maintained by Nehad through the month of January 2010 (The
amounts in Iraqi Dinars) (IDs).
1. Mr. Nehad started business by bringing in cash 50000000
2. Bank account opened 10000000
5. Loan received from Ahmed by cheque deposited in the
bank 60000000
9. Goods purchased from Raheem 30000000
10. Sold goods to Salam on credit 50000000
16.Stationery items purchased in cash 30000000
17.Received cheque form Salam on account 50000000
28. Paid by cheque to Raheem on account 30000000
30. Cash withdrawn from Bank 10000000
Solution:
Journal NEHAD
IDs IDs
2010 Cash A/c Dr 50000000
Jan 1 To Mr. Nehad's Capital A/c 50000000
(Being business started by Mr. Nehad bringing in cash)
2 Bank A/c Dr 10000000
To Cash A/c 10000000
(Being Bank account opened by depositing cash in the Bank)
5 Bank A/c Dr 60000000

To Ahmed's loan A/c 60000000
(Being loan received from Ahmed deposited in the Bank)
To Raheem's A/c 30000000
(Being goods purchased from Raheem on credit)
10 Salam's A/c Dr 50000000
(Being goods sold to Salam on credit)
16 Stationery A/c Dr 30000000
(Being stationery items purchased in cash)
17 Bank A/c Dr 50000000
To Salam’s A/c 50000000
(Being cheque received from Salma on account)
28 Raheem's A/c Dr 30000000
To Bank A/c 30000000
(Being payment made by cheque to Raheem on account)
30 Cash A/c Dr 10000000
To Bank A/c 10000000
(Being cash withdrawn from Bank)
TOTAL 320000000 320000000
Exercise (4)
Journalize the following transactions:-
1.Jan 1 . 2010 Abdel Rehman commenced business with
cash IDs 40000000.
2.Purchased goods for cash IDs 500000.
3.Sold goods for cash IDs 300000.
6. Purchased one Motor Car for cash IDs 15000000.
9. Sold Machinery for cash IDs 9000000.
11. Purchased a Building on credit from Nadem IDs
20000000.
15. Sold Furniture on credit to Kamel IDs 9500000.
17. Paid Cartage IDs 110000.
22. Received commission IDs 50000.
27. Cash sales IDs 1200000.
29. Cash purchases IDs 600000.
30 Received on account from Ahmed IDs 350000.
31. Paid cash to Sami on account IDs 190000.
Solution:
Journal of Abdel Rehman

IDs IDs
2010 Jan Cash A/c Dr 40000000
1 To Capital A/c 40000000
(Being capital brought into the business )
To Cash A/c 500000
(Being goods bought for cash)
To Sales A/c 300000
(Being goods sold on a cash basis)
6 Motor Car A/c Dr 15000000
(Being purchased Motor Car for cash)
9 Cash A/c Dr 9000000
To Machinery A/c 9000000
(Being Machinery sold for cash )
Balance c/d 64800000 64800000
11 Balance b/c forward 64800000 64800000
Building
1 A/c Dr 20000000
To Nael's A/c 20000000
(Being furniture sold on credit)
15 Kamel'sA/c Dr 9500000
To Furniture A/c 9500000
(Being Furniture sold on credit)
17 Cartage A/c Dr 110000
To Cash A/c 110000
(Being cartage paid)
To Commission A/c 50000
(Being cash received for commission)
27 Cash A/c Dr 1200000
(Being goods sold for cash)

To Cash A/c 600000
(Being goods purchased for cash)
30 Cash A/c Dr 350000
To Ahmed's A/c 350000
(Being cash received on account from Ahmed)
31 Sami's A/c Dr 190000

To Cash A/c 190000
(Being cash paid to Sami on account)
TOTAL 96800000 96800000

5-KINDS OF ENTRIES ‫انواع القيود‬
Entries recorded in the Journal are classified into two kinds:
1. Simple Entry ‫القيد البسيط‬
In this type of entry, only two accounts are affected. One

account is debited and another account is credited like the entries
mentioned above.
2. Compound Entry ‫القيد المركب‬
In a compound entry, more than two accounts are affected. In

this kind of entry there may be:-
(1) Several Accounts are to be debited and one account is to be
credited.
(2) One Account is to be debited and several other accounts are to
be credited.
(3) Several Accounts are to be debited and several accounts are to
be credited.
Exercise (5)
Walled started business with Cash IDs 15000000, Goods

worth IDs 3000000 and Machinery worth IDs 2000000.
No Particulars Debit Credit

IDs IDs
1. He bri1 11. 1.He brings cash in business:-
Cash A/c Dr 15000000
To Capital A/c 15000000
2 2.He brings goods in business:-

Goods A/c Dr 3000000
3. He b 33.He 3.brings machinery in business :-

Machinery A/c Dr 2000000
In all the above transactions the capital A/c is commonly

credited. Hence, instead of making three entries separately, a
combined entry may be conveniently passed as follows:-
Entry Dr. Cr.
Cash A/c Dr 15000000
Goods A/c Dr 3000000
Exercise (6)
Give a compound Journal entry for each of the following

transactions:
▪1-1-2010 Started business with goods of IDs 4000000, Furniture of
IDs 1000000 Cash IDs 2000000 and a loan of IDs 3000000 from
Naser .
▪2-1-2010 purchased goods of IDs 1000000 from Hatim and paid
him half the amount due.
▪3-1-2010 sold goods of IDs 1200000 to Falih and received from
him half the amount due.
▪5-1-2010 the proprietor withdrew for personal use IDs 100000
from the bank and IDs 400000 from office cash.
▪7-1-2010 sold goods for IDs 2000000 and received in exchange
Furniture IDs 1800000 and Stationery of IDs 200000.
Solution:
IDs IDs
Jan. 1 Stock A/c Dr 4000000
Furniture A/c Dr 1000000
Cash A/c Dr 2000000
To Naser's Loan A/c 3000000
(Being assets and liabilities brought in to start
the business)

To Cash A/c 500000
To Hatim's A/c 500000
(Being goods purchased and part payment
made)
Falih's A/c Dr 600000
(Goods sold and part of the amount received )
To Cash A/c 400000
To Bank A/c 100000
(For money withdrawn from Bank and from
office cash for the proprietors personal use)
7 Furniture A/c Dr 1800000
Stationery A/c Dr 200000
(For Furniture and stationery received in
exchange for goods sold)
TOTAL 11700000 11700000
6-CHART OF ACCOUNTS ‫خريطة الحسابات‬
Accounts in the Ledger are normally arranged in the

following order: Assets, Liabilities, Owner's equity, revenues and
expenses and for quick and easy reference, each account is
numbered. A complete listing of these numbers along with the
respective account titles is known as a chart of accounts. The chart
of accounts is shown in the following chart.
The first digit refers to the type of the account and the next
two digits identify the specific account, Thus, all asset account
begin with (1), Liability accounts begin with (2),expenses accounts
begin with( 3) , and revenues begin with (4).
Every business must develop a chart of accounts which is
most appropriate for its purpose for example; a large company may
use a ten - digit number system so to identify the division or unit,
plant, product Line, and so on(‫)وهكذا‬.
Chart of Accounts
Current Assets Liabilities

- Cash - Creditors
- Accounts receivable - Accounts Payable
- Inventory - Loan Short-Term
- Loan Long-Term
Fixed Assets Owner's Equity
- Land - Capital
- Building - Retained Earnings
- Office Equipment - Reserves
- Furniture
Expenses Revenues
- Salaries - Sales
- Electricity - Fees Earned
- Supplies - Interest Received
- Advertisement - Discount Received
- Telephone - Commission Received
- Rent
- Insurance
- Depreciation
SUMMARY
Journal
is a book in which the every first record of any

business transaction is made.
Journalization
Entering the business transaction in the journal is
called journalizing.
Entry
Recording of a transaction in account books is called
entry.
Debit
Denotes receiving aspect. Further it refers to writing
the entry on the left hand side of the account note book.
Credit
Denotes giving aspect. Further it refers to writing the
entry on the right hand side of the account note book.
Chart of account
A complete framework of account numbers and
associated accounts titles.
Test Questions
1- Choose the correct answer: The amount brought in by the

proprietor in the business should be credited to:-
a. Cash account.
b. Capital account.
c. Drawings account.
d. Bank account.
2- Choose the correct answer: The amount of salary paid to Khalid
should be debited to:-
a. Cash account.
b.salary account.
c. Khalid’s account
d.administrative expenses.
3-Cash account is debited by:

a-Amounts collected cash.
b-amount paid cash
c-Cash purchases.
d- Credit sales.
4-If the total of debits...........….the total of credits for x account, the
balance is credit.
a-Less than.
b- More than.
c- Equal.
d- We cannot determine.
5-Accounts that normally have debit balances are:
a- assets, expenses, and revenues,
b- assets, expenses, and owner's capital,
c- assets, liabilities, and owner's drawings,
d- Assets, owner's drawings, and expenses.
6-Which of the following is not part of the recording process?

a- Analyzing transactions.
b- entering transactions in journal,
c- Preparing a trial balance.
d- Posting transactions.
7-Posting:
a- normally occurs before journalizing,
b- transfers ledger transaction data to the journal,
c- is an optional step in the recording process,
d- Transfers journal entries to ledger accounts.
8- ....... ………is a list of accounts with their balances at a given

time.
a-Journal.
b-Ledger,
c-Trial balance.
d-Posting.
9- Prepare cash account from the following transactions:-
1.1.2010 Purchased goods for cash IDs 2000000.
5.1.2010 Sold goods for cash IDs 20000000.
25.1.2010 Paid salaries IDs 3000000
Balance the account on 31.1.2010.
10- Pass journal entries in each of the following cases

A. Payment made to Jaber IDs 1000000 and he allowed a
cash discount of IDs 50000.
B. Cash received from Naser IDs 800000 and allowed
him IDs 50000 as discount.
11-prepares cash account and balances it on 31st March

2010.
2010 IDs
March 1. Opening balance of cash 3200000
5. Cash sales 4000000
6. Cash purchases from Tahseen 2000000
8. Paid for advertisement 200000
9. Paid for News papers 120000
10. Received from Hashim 1650000
12. Paid Telephone Bill 250000
22. Sold goods to kareem 6700000
28. Received cash from kareem in full settlement 6500000
12-Answers of some previous questions in chapter (3):
No a b c D
1 x
2 x
3 x
4 x
5 X
6 x
7 X
8 x

CHAPTER
(4)
1-DEFINITON OF LEDGER
2-PROCESS OF PREPARING THE

LEDGER ACCOUNTS
3-BALANCING THE LEDGER

ACCOUNTS
CHAPTER
(4)
When goods are purchased or sold during a particular period,
the Journal will contain recording all these transactions but it will
not be helpful in giving to user the total figures of purchases, sales,
total amounts received or paid .To avoid the inconveniences)‫(عيوب‬
of the journal and to facilitate easy collection of data, a book
named "Ledger" ‫ سجل االستاذ‬is maintained.
1-DEFINITON OF LEDGER ‫تعريف سجل األستاذ‬

The ledger contains almost all the accounts of a business. It
helps the users to get speedy and accurate (‫ )دقيقة‬information with
respect to a particular account. This Book is maintained for keeping
individual record of persons, properties, Expenses, Revenues, and
gains and Losses.
The transactions are first recorded in the journal and when they
occur .Subsequently these transactions or entries are posted in the
respective ledger accounts. Each ledger account is totaled and
balanced at the end of the accounting period. This book-contains
many pages.
The relationship between the business and a particular account

on a given date can be ascertained only from the ledger. For
instance, if a business man wants to know on a particular date the
amount due from a certain customers (‫ )زبائن‬or debtors, it can be
known only from the ledger. Various transactions pertaining )‫)يالئم‬
to different dates of a particular account may be spread over ( ‫)توزع‬
in the journal on various pages but in the ledger, they are found in
one page .
NAME OF THE ACCOUNT

DEBIT (DR) ‫ــــــــــــــــــــــــــــــــــــــ‬A/c CREDIT (CR)
Date Particulars J.F Amount Date Particulars J.F Amount
Each page of the ledger is numbered )‫ )ترقم‬. Left hand side is

called debit side and right hand side is called the credit side.
A small figure for indicate the flow between more than two
parties, the enterprise was intermediary agency.
Figure (4)
Debit (Bank) Credit (customer)
Enterprise
(Cash Sales)
Debit (Supplier) Credit (Bank)
Enterprise
(Cash
purchases)
The ledger helps to achieve the following interests:-

(1)All personal accounts would show how much money is
payable )‫ )تدفع‬to creditors and how much to be receivable from
debtors .
(2)The nominal accounts would show the sources of income and the
amount spent )‫ (انفق‬on various mains of expenses.
2-PROCESS OF PREPARING THE
LEDGER ACCOUNTS
(1)The name of the account should be written in the middle.

(2)The date on which transaction occurred should be written in the
date column.
(3)In the particulars column on the credit side, name of the account
to be debited should be written. It is to begin with the word "BY".
(4)In the particulars column on the debit side, name of the account
to be credited should be written. It is to begin with the word "TO".
(5)In the J.F column, page number of the journal should be written.
(6)The amount of the transaction should be written in the amount
column.
(7)Opening debit balance of the amount of the transaction should
appear (‫ )يظهر‬as ,"To Balance (b/d)" on the debit side of the account
and similarly opening credit balance of the account should appear
as "By Balance (b/d)" on the credit side of the account.
(8)Real accounts like Cash A/c , Furniture A/c , Machinery A/c , etc
always has an opening debit balance .
(9)Liabilities like Capital A/c, Bank Overdraft, Sundry Creditors
etc, will have a credit balance.
(10)Every ledger account should be balanced periodically )‫ )دوريا‬as
required by the business concern.
3-BALANCING OF LEDGER ACCOUNTS
‫ترصيد حسابات األستاذ‬
At the end of a certain period, the accounts are balanced. The
following steps should be taken in balancing an account:-
(1)Make a total of both the sides of the ledger account. This can be
done on a rough sheet )‫ )ورقة خارجية‬.
(2)Compute (‫ )أحسب‬the difference between the totals of both sides .
(3)Put the difference on the lighter side of the account, by writing
against it : "By balance c/d" , 'To balance c/d" as the case may be .
If the debit side is heavier on the credit side of the account as. "By
balance, the difference will appear (‫ )يظهر‬c/d", and if the credit side
is heavier ) ‫ )أكثر‬, the difference will appear on the debit side of an
account as , 'To balance c/d".
(4)Make the total of both sides. The total of the debit side will now
agree with the total of the credit side of the account. It should be
remembered that the total of both sides should agree with each
other.
(5)Bring down the balance on the opposite side of the account, 'To
balance c/d" is brought down on the credit side below the totals in
the particular columns as "By balance b/d”, and "By balance c/d" is
brought down on the debit side of the account in the "particulars
column below the total as 'To balance b/d".
When the totals of the two sides are compared, an account will
have a debit balance if the total of the debit amounts exceeds the
credits, conversely, the Account will have a credit balance if the
credit amounts exceed the debits.
The concept of balancing is illustrated in the following diagram:
Figure (5)
Process of balancing ledger Accounts
Total both the sides of a ledger
accounts
Find out the differences
If debit side total is more than credit If credit side total is more than
side total Write the difference on debit side total Write the
credit side as "By balance c/d" difference on debit side as "To
balance c/d"
Make the total debit side equal to the total of credit side
Draw a double line after the totals
Bring forward the balance on the next date
If it is debit balance write on the If it is credit

debit side as Balance Write on the credit side as
"To balance b/d" "By balance b/d"
Exercise (1)
The following transactions are recording in the journal:

IDs IDs
2010 Cash A/c Dr 5000000

March 1 To Capital A/c 5000000
(Being Cash brought in as capital)
5 Furniture A/c Dr 3000000

To Cash A/c 3000000
(Being Furniture bought for cash )

To Salam's A/c 1500000
(Being goods purchased from Salam on Credit)
TOTAL 9500000 9500000
Required:
Post the above transactions into the ledger accounts.
►Posting to the ledger:
Dr. Cash A/c Cr.

2010 To Capital A/c 5000000 2010 By Furniture A/c 3000000
March 1 March 5
Capital A/c
2010 By Cash A/c 5000000
March 1
Furniture's A/c
2010 To Cash A/c 3000000

March 5
Purchase's A/c
Dr. Cr.
2010 To Salam's A/c 1500000
March 9
Salam’s A/c
2010 By Purchases 1500000
March 9 Account
►DEBIT BALANCE ( ‫)الرصيد المدين‬
If the debit side total is heavier than the credit side total, the
balance will be debit balance.
►CREDIT BALANCE )‫)الرصيد الدائن‬
If the credit side total is heavier than the debit side total , the
balance will be credit balance.
Exercise (2)
The following transactions are extracted from rahim's books through
the month of January 2010 :-
1-1-2010 Rahim started business with a capital of IDs 15000000.
2-1-2010 He purchased goods from Maher on credit IDs 2000000.
3-1-2010 He paid cash to Maher IDs 1000000.
4-1-2010 He sold goods to Senan IDs 2000000.
5-1-2010 He received cash from Senan IDs 3000000.
6-1-2010 He further purchased goods from Maher IDs 2000000.
7-1-2010 He paid cash to Maher IDs 1000000.
8-1-2010 He further sold goods to Senan IDs 20000000.
9-1-2010 He received cash from Senan IDs 10000000.
19-1-2010 Paid in to Bank IDs 10000000.
20-1-2010 Amount withdrawn from Bank for personal use IDs 2000000.
30-1-2010 Paid salaries to staff IDs 3000000.
31-1-2010 Received cash from Senan IDs 25000000.
31-1-2010 Withdrew goods from business for personal use IDs 2000000.
Required:
Journalize the above transactions in the journal of Rahim and post them
into the ledger and balance the accounts on 31st January 2010.
Solution:
(1)Journal of Rahim
IDs IDs
2010
January 1 Cash A/c Dr 15000000
To Rahim's capital A/c 15000000
(Being commencement of business )
To Maher's A/c 2000000
(Being purchase of goods on credit)
3 Maher's A/c Dr 1000000
To Cash A/c 1000000
(Being payment of cash to Maher)
4 Senan's A/c Dr 2000000
(Being goods sold to Senan )
5 Cash A/c Dr 3000000
To Senan's A/c 3000000
(Being cash received from Senan)
To Maher's A/c 2000000
(Being purchase of goods from Maher)
7 Maher's A/c Dr 1000000
To Cash A/c 1000000
(Being payment of cash to Maher)
8 Senan's A/c Dr 20000000
(Being goods sold to Senan)
9 Cash A/c Dr 10000000
(Being Cash received from Senan)
19 Bank A/c Dr 10000000
(Being Cash deposited in to bank )
To Bank A/c 2000000
(Amount drawn from the bank for personal use )
Balance c/d (Total of the page) 68000000 68000000
30 Salaries A/c Dr 3000000
To Cash A/c 3000000
(Being Cash paid for Staff)
31 Cash A/c Dr 25000000
(Being Cash received from Senan )
(Being goods with drawn for personal use)
TOTAL 98000000 98000000
(2)Ledger Accounts
Cash A/c
Dr. Cr.
IDs IDs
2010 Jan 1 To Capital A/c 15000000 2010 Jan 3 By Maher A/c 1000000
5 To Senan's A/c 3000000 7 By Maher A/c 1000000
9 To Senan's A/c 10000000 19 By Bank A/c 10000000
31 To Senan's A/c 25000000 30 By Salaries A/c 3000000
31 By Balance c/d 38000000
53000000 53000000
Feb.1 To Balance b/d 38000000
Capital A/c
Dr. Cr.
2010 Jan. 31 To balance c/d IDs 2010 Jan. 1 By Cash A/c IDs 15000000
15000000
15000000 15000000
2010 Feb. 1 By Balance b/d 15000000
Purchases A/c
Date Particulars Amount Date Particulars Amount
IDs IDs
2010 2010
Jan. 2 To Maher's A/c 2000000 Jan. 31 By Drawings A/c 2000000
Jan. 6 To Maher's A/c 2000000 Jan. 31 By Balance c/d 2000000
4000000 4000000
2010 To Balance b/d 2000000
Feb. 1
Maher's A/c
IDs IDs
2010 2010
Jan. 3 To Cash A/c 1000000 Jan. 2 By Purchases A/c 2000000
Jan. 7 To Cash A/c 1000000 Jan. 9 By Purchases A/c 2000000
Jan. 31 To Balance c/d 2000000
4000000 4000000
2010 By Balance b/d 2000000
Feb. 1
Senan's A/c
IDs IDs
2010 2010
Jan.4 To Sales A/c 2000000 Jan.5 By Cash A/c 3000000
Jan.8 To Sales A/c 20000000 Jan.9 By Cash A/c 10000000
Jan.31 To Balance c/d 16000000 Jan.31 By Cash A/c 25000000
38000000 38000000
2010 By Balance b/d 16000000
Feb. 1
Sales A/c
IDs IDs
2010 To Balance c/d 22000000 2010 By Senan's A/c 2000000

Jan.31 Jan.4 By Cash A/c 20000000
Jan.8
22000000
2010 By Balance b/d 22000000
Feb. 1
Bank A/c
IDs IDs
2010 2010
Jan.19 To Cash A/c 10000000 Jan.21 By Drawings A/c 2000000
Jan.31 By Balance b/d 8000000
10000000 10000000
2010 To Balance c/d 8000000
Feb. 1
Drawings A/c
IDs IDs
2010 To Bank A/c 2000000 2010 By Balance c/d 4000000

Jan.21 To Purchases A/c 2000000 Jan.31
Jan.31
4000000 4000000
2010 To Balance b/d
Feb. 1
Salaries A/c
IDs IDs
2010 To Cash A/c 3000000 2010 By Balance c/d 3000000

Jan. 30 Jan. 31
3000000 3000000
2010 To Balance b/d 3000000
Feb. 1
TRIAL BALANCE
As on 31st January 2010
Serial Particulars L.F Debit Credit
No.
IDs IDs
1 Cash Account 38000000

2 Capital Account 15000000
3 Purchases Account 2000000
4 Maher's Account 2000000
5 Senan's Account 16000000
6 Sales Account 22000000
7 Bank Account 8000000
8 Drawings Account 4000000
9 Salaries Account 3000000
Total 55000000 55000000
SUMMARY
Ledger
It is a book which records all the transactions from the
journal into a classified form.
Posting
The process of transferring the entries from the journal
to the ledger is called posting.
Balancing
Means the summation of the two sides of a account
and find out the balance.
Balance
Balance is the difference between the debit side and credit
side of an account.
Test Questions
1-What is the meaning of ledger? What is its importance?
2-What is the meaning of account? Give a specimen )‫ )نموذج‬of an

account?
3-What is the meaning of balancing an account?
4-Why are the accounts balanced?
5-How are the accounts balanced?
6-Enter the following transactions in the journal of Waleed and

prepare the necessary ledger accounts and balance them as on
30th April 2010.
April .1 Waleed brought cash IDs 10000000 Stock worth IDs
7000000 into his business.
7.He purchased office Furniture IDs 2000000
8.He bought stationery on credit from Mr. Ismail IDs
50000
12. He sold goods to Ahmed IDs 1000000
14.Received cash from Salam IDs 2000000.
15.Paid commission to Sammy IDs 250000
18. He paid salaries for the Month of March IDs 5000000.
25. He exchanged furniture for goods worth IDs 200000.
7-Pass Journal entries of the following transactions and prepare
necessary ledger accounts. Balance the ledger accounts on
28th February 2010.
2010 Feb. 1 Started business with cash IDs 10000000 and
machinery worth IDs 5000000.
5. Purchased Motor Car for IDs 5000000.
8. Cash purchases IDs 2000000.
10. Purchased goods from Khalid IDs 8000000.
20. Paid Travelling expenses IDs 100000.
25. Sold goods for IDs 15000000.

CHAPTER
( 5)
THE TRIAL BALANCE
1-DEFINITIN OF TRIAL BALANCE
2-METHODS OF PREPARING THE
TRIAL BALACE
3-OBJECTS OF TRIAL BALANCE
4-MAIN CHARACTERISTICS AND
USES OF A TRIAL BALANCE
5-LIMITATIONS OF A TRIAL
BALANCE
CHAPTER
(5)
THE TRIAL BALANCE

‫ميزان المراجعة‬
After posting journal entries into the ledger, all the ledger
accounts are balanced. The trial balance is prepared after balancing
the ledger accounts. If the trial balance is established it means that
all the balances of accounts in the ledger are posted by manner
arithmetically accurate. The total debit balances must be equal to
the total of the credit balances when the accounts are balanced.
1- DEFINITIN OF TRIAL BALANCE ‫تعريف‬

‫ميزان المراجعة‬
Trial balance is a list of accounts having balances in

ledger, the debit or credit balance of each accounts, the debit
balance and the total of credit balances are equal. If the Trial
Balance does not agree (‫)يتطابق‬, it means that there are some errors
to be detected and rectified. Thus the Trial Balance forms a
connecting link (‫ )أداة ربط‬between the ledger accounts and final
accounts. It is prepared at the end of a financial year. But it can also
be prepared monthly or at any time as required.
Items Nature of Balance
Assets Debit
Liabilities Credit
Expenses Debit
Incomes Credit
Provisions Credit
Reserves Credit
Capital Credit
Closing stock* Debit
Drawings Debit
* Closing stock (‫ )مخزون اخر المدة‬will not appear in the Trial

Balance. It will be shown in the adjustment (‫)التسوية‬.
Trial Balance contains (‫ )يحتوي‬six main columns:
(1) Serial Number

(2) Account Number
(3) Name of the Account
(4) Ledger Folio
(5) Debit Column
(6) Credit Column.
Generally in a trial balance, debit and credit balances are listed
on the left hand side and right hand side respectively. A specimen
)‫ )نموذج‬ruling of the Trial balance is given below:
Trial Balance of Ismail Ibrahim

as on 31 st Dec, 2010
Serial Account Name of Account L.F Dr Cr
No. Number IDs IDs
(1) (2) (3) (4) (5) (6)
TOTAL xxx xxx
• Header Row
The heading row contains the heading for the trial balance. It
consists of the details relating to name of the organization and the instance
to which the ledger account balances pertain.
• Particulars
Each row in the trial balance pertains to the information relating to
an account. The name of the Account head is written in the particulars
column.
• Ledger Folio (L.F)
Ledger Folio gives the information relating to the page number in
the ledger from which the information relating to the ledger is being
extracted.
• Debit amount
This is the amount whose information is extracted from the ledger
account.
• Credit amount
This is the amount whose information is extracted from the ledger
account.
2-METHODS OF PREPARING THE
TRIAL BALACE ‫طرق أعداد ميزان المراجعة‬
There are two methods for preparing of Trial Balance:

(1) Method of Totals ‫طريقة المجاميع‬
The method of totals (sub-totals) takes the debit amount total
and credit amount total of each account in the ledger for preparing a
Trial Balance. This method is called also the Traditional method.
(2) Method of balances ‫طريقة األرصدة‬

This method is called also the Modern Method. Instead of
writing down two amounts (sub-totals), they are set off and only the
net balance is written. This balance is nothing but the balance
shown by the ledger account. That is the reason we say "the trial
balance is a statement of ledger account balances".
• Debit amount
This column has data to be filled only in case of accounts
with a debit balance. The data to be filled being the balance of the
ledger account with a debit balance.
Credit amount
This column has data to be filled only in case of accounts
with a credit balance. The data to be filled being the balance of the
ledger account with a credit balance.
3-OBJECTS OF TRIAL BALANCE ‫اهداف ميزان‬

‫المراجعة‬
The objects of trial balance are the following:
(1)Trial Balance forms the basis (‫ )أساس‬for preparing the profit and
loss account and Balance Sheet.
(2)Trial Balance provides easily the process of Arithmetical
accuracy (‫ )ضبط‬of books of accounts.
(3)Trial Balance provides a condensed picture (‫ )صورة موجزة‬of each
account in the ledger.
(4)Trial Balance helps in discovering of errors (‫ )اكتشاف األخطاء‬at an
early stage.
4-MAIN CHARACTERISTICS AND USES
OF A TRIAL BALANCE
‫الخواص واالستخدامات الرئيسية لميزان المراجعة‬
(1) Trial Balance is a statement (‫ ) قائمة‬prepared in a tabular form
having two columns. One for debit balances and the other for credit
balances.
(2)Closing balances of ledger accounts are shown in this statement.
(3)Trial Balance can be prepared at any date after closing the ledger
accounts.
(4)Trial Balance is a method of verifying arithmetical accuracy of
entries made in the ledger.
(5)Trial Balance helps in preparation of Trading A/c, Profit and
Loss A/c and the Balance Sheet at the end of the financial period
which exhibits (‫ )يصور‬the financial position ( ‫ ) المركز المالي‬of the
company.
Accounting Final
Trial
accounts
Procedures balance
5-LIMITATIONS OF A TRIAL
BALANCE‫محددات ميزان المراجعة‬
(1)Trial balance is not a conclusive proof (‫ )إثبات‬for the absolute
accuracy of the books of accounts.
(2)If an entry is omitted (‫ )حذف‬to be recorded even then the Trial
balance will tally.
(3)It will not reveal the errors of compensation (‫)األخطاء المعوضة‬. If a
book keeper forgets (‫يهمل‬،‫ )ينسى‬to post IDs 2000000 on the debit
side of a certain account and under posts IDs 2000000 on the credit
side of some other account, the trial balance will not be affected.
►Nature of Balances of Different Ledger Accounts:-
Debit and Credit Balances of ledger accounts
Debit Balances ‫ارصدة مدينة‬ Credit Balances ‫ارصدة دائنة‬
Assets:- Debit Balance Liabilities :- Credit Balance
1. Land 1. Capital
2. Buildings 2. Reserves
3. Machinery 3. Credit balance of P&L
4. Furniture 4. Sundry Creditors
5. Motor Cars 5. Bills Payable
6. Closing stock 6. Bank Overdraft
7. Debtors 7. Loans
8. Bills Receivable 8. Outstanding expenses etc.
9. Cash at Bank
10. Preliminary Expenses etc
Expenses:- Debit Balance Incomes :- Credit Balance
1. Rent 1. Sales
2. Commission 2. Discount received
3. Interest 3. Commission received
4. Wages 4. Rent received
5. Carriage in 5. Rent from tenants
6. Carriage out 6. Income tax refund
7. Interest on Capital 7. Profit etc.
8. Depreciation
9. Discount Allowed
10. Salaries
11. Sundry Expenses
12. Advertisement
13. Insurance etc.
14. Purchases
Exercise (1)
The following accounts and account balances are available for
Al-Fallah Company as on 31st December 2010.
Cash in hand IDs 440000; Cash at bank IDs 2860000 ; Stock in
hand IDs 1240000 ; Sundry Debtor IDs 5700000 ; Sundry Creditors
IDs 2300000 ; Bills Receivable IDs 3200000 ;Bills Payable IDs
1800000 ; Sales IDs 7000000 ; Purchases IDs 5500000 ; Sales
Return IDs 400000 ; Purchases Return IDs 300000 ;Plant and
Machinery IDs 8000000 ; Land and Building IDs 7000000 ;
Goodwill IDs 5000000 ; Rent Received IDs 250000 ; Salary IDs
1200000 ,Dividend (Cr) IDs 330000 ; Wages IDs 550000 ; Lighting
IDs 200000 ; Commission IDs 370000 ; Interest IDs 130000 ;
Drawings IDs 2400000 ; Capital IDs 32210000.
Required:
prepare a Trial Balance according the serial accounts,
assume (‫ )افترض‬that all accounts have normal balances.
Solution:
Al-Fallah Company Trial Balance
Serial Account Name of the Accounts L.F Debit IDs Credit IDs
No. Number
1. Cash in hand 440000

2. Cash at bank 2860000
3. Stock in hand 1240000
4. Sundry Debtors 5700000
5. Sundry Creditors 2300000
6. Bills Receivable 3200000
7. Bills Payable 1800000
8. Sales 7000000
9. Purchases 5500000
10. Sales Return 400000
11. Purchases Return 300000
12. Plant and Machinery 8000000
13. Land and Buildings 7000000
14. Good will 5000000
15. Rent Received 250000
16. Salary 1200000
17. Dividend (Cr) 330000
18. Wages 550000
19. Lighting 200000
20. Commission 370000
21. Interest 130000
22. Drawings 2400000
23. Capital 32210000
TOTAL 44190000 44190000
Exercise (2)
The following incorrect Trial Balance of Jassim Trader is extracted from his books.
Serial Account Name of the Accounts L.F Debit Credit

No. Number IDs IDs
1 Capital 8950000
2 Drawings 105000
3 Opening Stock 3725000
4 Purchases 23100000
5 Sales 39425000
6 Wages and Salaries 6205000
7 Lighting and heating 310000
8 Equipment 3600000
9 Carriage Outwards 230000
10 Returns Outwards 290000
11 Returns Inwards 105000
12 Provision for Bad debts 350000
13 Discount allowed 285000
14 Discount Received 315000
15 Rent, Rates ,Insurance 1115000
16 Motor Vehicles 1475000
17 Cash in hand 110000
18 Sundry Creditors 4925000
19 Sundry Debtors 13920000
20 Bank Overdraft 975000
55230000 55230000
TOTAL
Required:
Prepare a correct Trial balance.
Solution:
Jassim Trader
Correct Trial Balance as on 31st
Seria Account Name of the Account L.F Debit Credit
l Number IDs IDs
No.
1. Capital 8950000
2. Drawings 1050000
3. Opening Stock 3725000
4. Purchases 23100000
5. Sales 39425000
6. Wages and Salaries 6205000
7. Lighting and heating Equipment 310000
8. Equipment 3600000
9. Carriage Outwards 230000
10. Returns Outwards 290000
11. Returns Inwards 105000
12. Provision for Bad debts 350000
13. Discount allowed 285000
14. Discount Received 315000
15. Rent, Rates, and Insurance 1115000
16. Motor Vehicles 1475000
17. Cash in hand 110000
18. Sundry Creditors 4925000
19. Sundry Debtors 13920000
20. Bank Overdraft 975000
TOTAL 55230000 55230000

Exercise (3)
The following balances are extracted from the books of Mr. Ali
Serial Names of the Accounts Amount
No. IDs
1 Stock ( 1.1.2010) 46800000
4 Freight and Carriage 18600000
5 Rent and Taxes 5700000
6 Salaries and Wages 9300000
8 Interest on loan 900000
9 Printing and Advertising 14600000
10 Cash at Bank 8000000
11 Furniture 500000
12 Discount 1800000
13 General Expenses 11450000
14 Insurance 1300000
15 Postage and Telegram 2330000
17 Travelling expenses 870000
18 Drawings 40000000
19 Capital 86690000
20 Sales 389600000
23 Loan @ 6% 20000000
24 Miscellaneous income 250000
25 Discount Earned 4190000
Required:
Prepare a Trial Balance of Mr. "Ali" as at 31st December 2010.
Solution:
Trial Balance of Mr. "Ali" as at 31st December 2010.
Serial Names of The Accounts L.F Debit Balance Credit Balance
No. IDs IDs
1 Stock (1.1.2010) 46800000

4 Freight and Carriage 18600000
5 Rent and Taxes 5700000
6 Salaries and Wages 9300000
8 Interest on loan 900000
9 Printing and Advertising 14600000
10 Cash at Bank 8000000
11 Furniture 5000000
12 Discount 1800000
13 General Expenses 11450000
14 Insurance 1300000
15 Postage and Telegram 2330000
17 Travelling expenses 870000
18 Drawings 40000000
19 Capital 86690000
20 Sales 389600000
23 Loan @ 6% 20000000
24 Miscellaneous income 250000
25 Discount Earned 4190000
TOTAL 521330000 521330000
SUMMARY
Trial balance is a statement of ledger account balances within a
Ledger, at a particular instance. If we balance all the ledger accounts
at a particular instance and then prepare a statement of balances we
get the "Trial balance".
Trial Balance is a statement, not an account.
Trial balance is a statement and it has got a conventional format of

its own. It is not a Ledger Account.
Trial balance is prepared to check the mathematical/arithmetic

accuracy of accounting.
Trial balance is prepared for help in preparation of final

accounts.
Trial balance is prepared for find out the accounting errors.
Trial Balance Agrees (Or) Trial Balance is tallied. Whatever may

be method we use for preparing the trial balance, if the total of
the debit column and the credit column are the same we say
that the trial balance is tallied or the trial balance agrees.
Method of preparing Trial balance: Two methods, the Traditional

method and the Modern method.
Test Questions
1.Explain the meaning and definition of trial balance?

2.Discuss the objectives of trial balance?
3.Explain the different characteristics and uses of trial balance?
4.Explain the procedure for the preparation of trial balance?
5. The following balances extracted from the books of Ibrahim as
on 31st December 2010
Names of Accounts IDs Names of Accounts IDs
Opening Stock 15000 Printing and stationery 3400
Bills Payable 6000 Insurance 750
Outstanding wages 1700 Salaries 10000
Purchases 45700 Creditors 12000
Wages 9900 Bank Overdraft 3000
Investment 3500 Postage and Telephone 700
Sales 79800 Machinery 26800
Capital 65000 Furniture 6400
Carriage Inwards 2600 Debtors 25000
Carriage Outwards 2000 Cash at Bank 10500
Bad Debts 250 Advertisement 2000
Bills Receivable 4000 Reserve for Bad Debts 1000
Required:
Prepare a trial balance.
6-From the following information prepare a Trial Balance as on 31st
December 2010:
IDs
Assets 10000000
Capital 8000000
Commission 2000000
Discount receivable 1000000
Discount Allowed 1000000
Drawings 2500000
Purchases 12000000
Rent 3000000
Rent Payable 2000000
Sales 20000000
Sundry Expenses 500000
7-The following information is extracted from Hassan's Books as on 31st December
2010 (Amounts in thousands)
IDs
Purchases 20500
Sales 22000
Returns Inwards 1800
Returns Outwards 1000
Carriage Inward 600
Carriage Outward 400
Bank Overdraft 5400
Loan 1200
Commission 800
Drawings 2000
Investments 8000
Debtors 12000
Creditors 4000
Lighting 1000
Cash in hand 4500
Capital 18000
Required:
Prepare a Trail Balance.
8-Enter the following transactions in a Journal and prepare Ledger accounts.
Also balance the ledger accounts and draw a Trial Balance:-
2010 IDs
March.
1 Started business with cash 25000000
4 Cash Deposited in AL-Rasheed Bank 10000000
8 Purchased goods for cash 7000000
12 Purchased goods from Bushra Stores 5000000
15 Sold goods to Maher 8000000
16 Purchased goods from Amar 12000000
20 Cash paid to Bushra 4000000
22 Received cash from Maher 8000000
23 Cash withdrawn from the AL-Rasheed Bank for office 5000000
use
24 Purchases made by cheque 2000000
25 Cash sales 15000000
26 Cash Purchases 2000000
27 Paid salaries 2000000
29 Paid office rent 1500000
9- Journalize the following transactions and prepare necessary ledger accounts
and draw a Trial Balance:-
2010 IDs
Jan. 1. Started business with cash 15000000
2. Sold goods for cash 25000000
4. Purchased goods from Abdul-Kareem 10000000
6. Purchased goods 5000000
12. Cash withdrew from the Bank for Personal use 12000000
15. Paid to Abdul- Kareem 10000000
16. Sold goods to Hytham and received a cheque 7800000
19. The above cheque deposited in the bank
20. Purchased Furniture from Shareef 2000000
22. Purchased goods from Amine 5000000
25. Borrowed from Amine 7000000
26. Paid General expenses 2000000
28. Paid wages 100000
30. Purchased Machinery for cash 1500000
31. Paid wages for the erection of new Machinery 100000
10- Razak started business on 1st January 2010 with IDs 5000000 as cash in
hand IDs 25000000 in Bank account IDs 8000000 as stock in hand and IDs
10000000 as the value of Furniture. His transactions for the month were as
follows:-
2010 IDs
Jan. 1. Bought goods from Abass Hyder on credit 15000000
5. Paid Travelling expenses 500000
7. Sold to Naser by cash 2500000
15. Paid cash to Abass Hyder 10000000
17. Cash purchases 8000000
17. Cash sales 25000000
20. Deposited into bank 5000000
20. Bought from Salam Brothers goods 1500000
23. Paid for postage and stationery 50000
25. Paid cash to Salam Brothers 7300000
28. Paid for Advertisement 250000
31. Paid for Sundry Expenses 200000
Required:
Pass Journal entries for the above transactions and prepare
necessary ledger accounts, balance them, and prepare Trial balance on
31st Jan 2010.

CHAPTER
(6)
DISCOUNTS,ALLOWANCES
AND RETURNS
1-TYPES OF DISCOUNTS
2-PURCHASES RETURNS AND

ALLOWANCES
3-SALES RETURNS AND

ALLOWANCES
CHAPTER
(6)
DISCOUNTS, ALLOWANCES
AND RETURNS
‫الخصومات والسماحات والمردودات‬
An allowance in price given by the seller to the buyer is

known as a discount. This deduction may be in the price of goods
bought or sold or in the amounts of cash to be received or paid.
1- KINDS OF DISCOUNTS
There are several different types of discounts and allowances,
as show below:
(1)Trade Discount ‫الخصم التجاري‬

(2)Cash Discount ‫الخصم النقدي‬
(3)Quantity Discount ‫خصم الكمية‬
(1)TRADE DISCOUNT ‫الخصم التجاري‬

Trade discount is a percentage reduction from a list price
granted from the producer to his distributors or to customers. He
will make a discount of 5% or 10% or 15% as per his business
policy. Trade discount may be given from the wholesalers to the
retailers.
Trade discounts are not normally recorded in the accounts by
either the buyer or the seller, since they are neither gains nor losses
for the buyer or seller. Trade discounts will be shown only in the
invoice and not taken to books of accounts.
(2) CASH DISCOUNT ‫الخصم النقدي‬

Cash Discount is typically used by sellers to encourage
buyers to pay earlier, improving the seller's cash flow. The seller
called this discount sales discount; the buyer called this cash
discount purchase discount.
Cash discount is a deduction from the invoice price for prompt
payment. Cash Discounts can be expressed in many ways, including
as follow:
 3/15 net 30 which means the full (net) amount is due in 30 days,
but a 3% discount is available if paid within 15 days.
 Credit terms (5/10, n/ 30) mean that the debtor may take a 5
percent discount if the invoice is paid within 10 days of the invoice
date; otherwise (‫ )بتعبير اخر‬the debtor may wait 30 days and pay the
full amount of invoice without cash discount. Cash discount
allowed will appear in the books of accounts.
Cash discounts can also be tied to different methods of dating,
including:
●EOM Dating, which starts the payment clock at the end of the
month;
●Ordinary Dating, which starts the payment clock at the date of
the invoice;
●ROG Dating, which starts the payment clock when the buyer
receives the goods;
●X Dating, which starts the payment clock X days after the invoice
date.
Exercise (1)
Assume that the terms for purchase of IDs 1000000 of goods
on January 3 are 2/10, n/30. If the purchase is paid for on January
13, the buyer can take a 2 percent discount. Thus, the buyer must
pay only IDs 980000 to settle the invoice. The following entry
records the transactions:
Date Particulars Dr Cr
Jan.3 Purchases A/c Dr 1000000
To Creditors A/c 1000000
(Purchased goods on terms 2/10, n/30)
Jan. 13 Creditor A/c Dr 1000000
To Cash A/c 980000
To Purchase Discount A/c 20000
(Paid creditors for merchandise within
discount period)
Exercise (2)
Suppose that a company sells to a customer on April 12,2010
for IDs 1000000 on payment terms of "2/10 n/30". On April 22, that
is, within the discount period, the customer paid IDs 980000. The
required Journal entries in the seller's Books are:
Date Particulars Dr Cr
April 12. Debtors A/c Dr 1000000
(Being sold merchandise on credit)
April 22. Cash A/c Dr 980000

Sales Discount A/c Dr 20000
To Debtors A/c 1000000
(Being collected from debtors less discount)
►Differences between Trade Discount and Cash Discount
No Trade Discount No Cash Discount

1 Trade Discount is given 1 Cash Discount is given
by the seller to the buyer. by the creditor to the
debtor.
to increase the sales. for early payment or
timely payment.
at the time of purchase of at the time of settlement
goods. of debts.
4 Trade Discount is 4 Cash Discount is not
deducted from the invoice. deducted from the
invoice.
5 Trade Discount is not 5 Journal Entries for cash

appearing in the books of discount are entered in
accounts. the books of accounts.
(3) QUNTITY DISCOUNT ‫خصم الكمية‬
Quantity discount is given to motivate buyers to buy more. The
quantity discounts vary according to the size of the order. Quantity
discount is debited to seller and credited to buyer.
Quantity Discount is simply a reduction of the price on the
purchase of a large quantity of goods. It is given to a customer
inducing him to purchase more and more goods. Usually, as the
purchased units increase, the customer gains a higher percentage of
quantity discounts.
In the books of accounts, the quantity discount is treated in same
manner as cash discount. But by the year end, it is closed to the
final accounts ( Trading account, profit and Loss Account)
according to the accounting treatments.
Exercise (3)
The following is a transaction occurred between Sameer and
Nameer:-
June. 5, 2010, Sameer sold good on credit IDs 5000000, of 500
sportive pieces, IDs 10000 per piece to Nameer.
(Note: 10% quantity discount on sales exceeding 200 pieces).
Required:
Record the transactions in the books of Sameer and the books
of Nameer.
Solution:
The quantity discount = Discount Rate × quantity eligible for Discount
= 10% × (500 - 200) = 30 pieces sportive
The value of quantity discount = 30 × 10000 = 300000 IDs.
Sameer's Journal:
Date Particulars Debit Credit
June, Nameer A/c Dr 4700000
5,2010 Quantity Discount payable A/c Dr 300000
(IDs 5000000 Credit sales with 10%
Quantity Discount )
31.12,2010 P&L A/c Dr 300000
To Quantity Discount payable A/c 300000
(Transfer of Quantity Discount payable to

P&L A/c)
Nameer's Journal:
June, Purchases A/c Dr 5000000
5,2010 To Creditors (Sameer) A/c 4700000
To Quantity Discount Received A/c 300000
(IDs 5000000 Credit purchase with
10% Quantity Discount)
31.12,2010 Quantity Discount Received A/c Dr. 300000

To P&L A/c 300000
(Transfer of Quantity Discount Received
to P&L A/c)
Exercise (4)
Babil Trading Company had the following transactions with
Khalid Store during May, 2010.
(1)May, 13 sold merchandise with list price of IDs 60000000 at a
discount of 30 percent; terms 1/10, n/60.
(2)May, 15. Accepted merchandise returned due to inferior quality
IDs 2000000.
(3)May, 19. Sold merchandise with list price of IDs 80000000 at a
discount of 30 percent; terms 1/10, n/60.
(4)May, 21. Received payment of the May 13 invoice in full.
(5)May, 30. Received payment of the May 19 invoice in full.
Required:
1. Prepare journal entries in Babil Trading records.
2. Prepare journal entries in Khalid store records.
Solution:
Babil's Trading Journal
Date Particulars Debit IDs Credit IDs
May, Debtors A/c Dr 42000000
13,2010 To Sales A/c 42000000
(Being sold goods on credit at discount of 30 percent,
terms 1/10, n/60)
May, Sales Returns and Allowances A/c Dr 2000000
15,2010 To Debtors A/c 2000000
(Being Allowance for Unsatisfactory goods(
May, Debtors A/c Dr 56000000
19,2010 To Sales A/c 56000000
(Being sold goods on credit at discount of 30 percent,
terms 1/10, n/60)
May, Cash A/c Dr 39600000
21,2010 Sales Discounts A/c Dr 400000
To Debtors A/c 40000000
(Being collected from debtors less discount)
May, Cash A/c Dr 5600000
30, 2010 To Debtors A/c 56000000
(Being collected from debtors without discount)
Khalid Store Journal
Date Particulars Debit IDs Credit IDs

May, Purchases A/c Dr 42000000
13,2010 To Creditors A/c 42000000
(Being purchased goods on credit at
discount of 30 percent terms 1/10,
n/60)
May, Creditors A/c Dr 2000000
15,2010 To Purchase Returns and 2000000
Allowance A/c
(Being Returned "unsatisfactory
goods to supplier)
May, Purchases A/c Dr 56000000
19,2010 To Creditors A/c 56000000
(Being purchased goods on credit at
discount of 30 percent term 1/10,
n/60)
21,2010 To Cash A/c 39600000
To Purchase Discounts A/c 400000
(Being paid creditors for goods
within discount period)
30, 2010 To Cash A/c 56000000
(Being paid creditors without
discount)
2-PURCHASES RETURNS AND
ALLOWANCES
‫مردودات المشتريات والسماحات‬
When merchandise purchased from supplier is found to be
unsatisfactory (‫)غير مرضي‬, the buyer may returns the goods or
accepts an allowance on the price. Whenever there is a purchase
return or allowance, the buyer sends the seller a debit note to notify
him that the seller's balance is being reduced. Purchases returns and
allowances are recorded by crediting the purchase Returns and
Allowances account, as illustrated below:
Creditors / Cash A/c's Dr xxx
To Purchase Returns and Allowances A/c xxx
Net Purchases = Purchases ‫ ( ــ‬Returns + Allowances )
3-SALES RETURNS
AND ALLOWANCES
‫مردودات المبيعات والسماحات‬
Most merchandising companies allow a customer to return
goods that are found to be unsatisfactory or defective (‫)ناقص‬. A
sales return is merchandise returned by a buyer. Sometimes the
customer finds that the goods supplied has minor defects and may
agree to keep such goods if an allowance, called sales allowance, is
made off the sale price. Sales allowances are granted for any
number of reasons, including inferior quality, damage, or
deterioration in transit.
In all cases of sales returns and sales allowances the seller
sends the buyer a document called a credit note, which indicates
that the balance in the customer's account is being reduced.
Sales returns and allowances could be recorded as debits to
the sales account because they cancel part of the selling price. A
contra sales account called Sales Returns and Allowances account
is debited. Sales returns are normally recorded in the year in which
the returns occur.
The Journal entry to record Sales Returns and Allowances
account as follows:
Sales Returns and Allowances A/c Dr xxx
To Debtors/Cash A/c xxx
(Allowance for return of merchandise)
Net Sales = Sales ‫( ــ‬Returns + Allowances )
Exercise (5)
Record the following transactions in the journal of the buyer - Ali -
and the seller - sameer:
-1'st June sameer sold goods for Ali 10,000000 IDs at 10% trade
discount with credit terms (5/10, n/45).
-3rd June sameer agreed to grant (‫ )منح‬quantity discount as follows:
2% for the first 2000 units
5% from 2001 - 4000 units
10% more than 4000 units
-Ali purchased (bought) 5000 units at IDs 10000 each.
-5th June sameer paid the amount for 1'st of June purchases.
Solution:
Sameer's Journal (The seller)
Date Particular Dr Cr
(1)
l'st Accounts receivable Dr 9000000
June To sales revenues 9000000
3rd Accounts receivable Dr 47600000
(2)
Quantity discount A/c Dr 2400000
To sales revenues 50000000
5th Cash A/c Dr 8550000
(3)
Sales discount A/c Dr 450000
To accounts receivable 9000000
(1) 10,000000 –(10,000000 × 10%) = 9000000
(2) 2000 units × 2% =40
►2000 units × 5% = 100
►1000 units × 10% = 100
(40 + 100 + 100) x IDs 10000 = 2400000 IDs

(3) 9000000 - (9000000 x 5%) = 8550000 IDs
Ali's Journal Book (The buyer)

June,1. Purchases A/c Dr. 9000000
To Accounts payable 9000000
Purchases A/c Dr. 50000000
June,3. To Quantity discount 2400000
To Accounts payable 47600000
June,5 Accounts payable Dr. 9000000
To purchase discount 450000
To cash 8550000
Installment sale occurred when the purchaser makes down

payment and agrees to pay the remainder in specified amounts at
stated interval over a period of time.
Revenue is recognized as cash is collected. Thus, revenue
recognition takes place at the point of cash collection rather than
the point of sale because there is uncertainty in the collection of the
receivable.
SUMMARY
♦Trade Discount:
Deduction in price given by the wholesaler/manufacturer to the retailer at the list
price or catalogue price.
♦Cash Discount:
Reduction in price give the creditor to the debtor is known as cash discount. This
discount is intended to speed payment and thereby provide liquidity to the firm.
They are sometimes used as a promotional device.
♦Quantity Discounts:
Sellers use the quantity discount to encourage buyers to buy more. This in turn can
help the seller to reduce their own production costs, which can help reduce prices
for the buyers. Examples of quantity discounts include “buy five for the price of
four” and “buy one get one free” deals.
♦Purchase Returns and Allowances:
Represent a reduction in the cost of goods purchased for resale. It is a contra
account to Purchases and its normal balance is a credit.
♦Sales Returns:
Are items purchased by customers, and then returned because they don't meet the
specifications ordered by the customer; or they arrived late; or the customer
received the wrong merchandise.
♦Sales Allowances
Are reductions in price given to the customer because the merchandise does not
meet the specifications ordered by the customer, but the customer is willing to
purchase the merchandise.
Test Questions
1-The claims for outsiders on the entity are:
a- assets
b- liabilities
c- revenues
d- expenses
2-If the capital balance at January 1, 2010 is IDs 6000000, new

investments by the owner 4000000, and drawings 2000000, net
income for 2010 is 3000000, net owner's equity on December
31,2010 is:
a-7000000 b-12000000 c-5000000 d-11000000
3-Additions to fixed assets are:

a- revenue expenditures.
b- debited to a repair expense account.
c- capital expenditures.
d- debited to purchases account.
4-The entry:
Purchases A/C Dr xx
To cash A/C xx
To Notes payable xx
a- is a simple entry,
b- is a compound entry in debit side,
c- is a compound entry in credit side,
d- is a compound entry in the two sides.
5-All the following are assets except:
a- cash.
b- equipment.
c- accounts receivables.
d- salaries expense.
6-A machine, cost IDs 5000000 and the balance of accumulated

depreciation IDs 4000000; sold cash by IDs 500000, there is:
a- gain IDs 500000.
b- loss IDs 500000.
c- neither gain nor loss.
d- the question is insolvable.
7-……….. is not recorded in accounting books.

a- Trade discount.
b- Quantity discount.
c- Sales discount.
d- Purchases discount
8-Which of the following accounts has a debit normal balance?

a- sales.
b- purchases returns,
c- purchases.
d- capital.
9-If Al-Warkaa' company granted quantity discount for its clients
as follows:
1% 1 IDs -3000000 IDs
2%3000001 IDs -7000000 IDs
5% more than 7000000 IDs
The sales for Abass is IDs 5000000 the quantity discount granted
to Abass is:
a-70000 b-110000 c-50000 d-130000
10-When goods are purchased on credit; the debit side of the entry
is:
a- sales.
b- accounts receivable,
c- purchases.
d- accounts payable.
11-State whether the following statements are True or False.
a. Cash discount will not appear in the cash book.
b. Purchases returns are a debit account.
c.Sales returns are a credit account.
d. Drawings are a nominal account.
12- Answers of some previous questions in chapter (6):
No a b c d
1 x
2 x
3 x
4 x
5 x
6 x
7 x
8 x
9 x
10 x
11 False False False True

CHAPTER
(7)
SUBSIDIARY BOOKS
1-CASH TRANSACTIONS

CHAPTER
(7)
SUBSIDIARY BOOKS
‫دفاتر األستاذ المساعدة‬
Where the transactions are numerous, the firm maintains
subsidiary books and journals, wherein the business transactions are
first recorded. Then the transactions are posted into the ledger and
final accounts are prepared. For the purpose of quicker work and
more turnovers, the journal is split into a number of subsidiary
books for recording a particular type of transactions by each
department of a business.
Advantages of subsidiary books:
(1) Make the work done easily and quickly.
(2) Increase the efficiency of accounting work.
(3) Save labor and time.
Thus separate books are maintained for cash transactions and
credit transactions:
1- Cash transactions:
a- Cash book for receipts and payments,
b- Petty cash book.
2- Credit transactions:
a- credit sales book.
b- credit purchases book.
c- purchases returns book.
d- sales returns book.
e- Notes (bills) receivable book.
f- Notes payable book.
1-CASH TRANSACTIONS ‫العمليات النقدية‬
A-Cash Book for receipts and payments
‫سجل النقدية للمقبوض ات والمدفوعات‬
A business has to receive cash and pay cash for its various
activities. The main sources of cash receipts are cash sales, receipts
from debtors, cash withdrawals from Bank, and taking loan from
others . The main sources of cash payments are cash purchases,
payments to creditors, deposits in the bank and payments to various
expenses.
The cash book records all the above transactions for a
particular period and the balance shown by the cash Book should be
equal to the actual cash on hand.
The two sides of a cash-book are receipts side and payments
side and the difference should be equal to the remaining cash in the
cash box. There is no need for a separate cash account in the ledger,
because the cash book itself is like a cash account in the ledger.
FORMAT OF A CASH BOOK
Date Receipts R.No. L.F. Amount Date Payments V.No. L.F. Amount
(*) ( **) IDs ( ***) IDs
The symbols appear in the above format are:-

(*) R.No. means Receipt Number
(**) L.F. means Ledger Folio
(***) V.No. means Voucher Number
(1)Receipts side ‫جانب المقبوضات‬
On Receipts side, cash account is always debited, all cash
receipts are debited.
(2)Payments side ‫جانب المدفوعات‬
On payments side cash account is always credited, all cash
payments are credited.
Exercise (1)
The following transactions are occurred during the month of December
2010.
December 1. Balance of cash on hand 400000
4.Introduced cash as further capital 10000000
5.Sold goods for cash 3000000
6.Collected from kassim 8000000
10.Purchased goods for cash 2000000
11.Paid to Rasheed 2500000
12..Paid commission to an agent 500000
15.Purchased office furniture for cash 2000000
16.Rent paid 100000
17.Taken cash for personal use 1000000
18.Cash sales 5000000
20.Received amount from Yasser 4000000
23.Dividend received in cash 100000
28.Paid salaries 2000000
30.Deposited Cash into bank 2000000
Required:
Enter the above transactions in a cash book with receipts and payments
and balance the cash book on 31st Dec. 2010.
CASH BOOK
Date Date
Receipts R. L Amount Payments L.No L.F Amount
No . IDs IDs
F
Dec. 1 To balance b/d 400000 Dec.10 By Purchases 2000000
4 To Capital 10000000 11 By Rasheed 2500000
5 To Sales 3000000 12 By commission 500000
6 To kassim 8000000 15 By Furniture 2000000
18 To Sales 5000000 16 By Rent 100000
20 To Yasser 4000000 17 By Drawings 1000000
23 To Dividends 100000 28 By Salaries 2000000
30 By Bank 2000000
30500000 30500000
2010
Jan.l To Balance b/d 18400000
►Two Column Cash Book ‫سجل النقدية ذو الحقلين‬

When an additional column for discount along with cash
column is provided on cash side of the cash book, it is known as
two column cash book. Discount column on the debit side
represents cash discount allowed to customers and credit side of this
column indicates cash discount received from creditors. Cash
columns are balanced as other ledger accounts, but discount
columns are not balanced but totaled.
Format of Double Column Cash Book
Date Particulars R. L.F. Discount Amount Date Particulars R. L.F Discount Amount
No. IDs IDs No. IDs IDs
►Posting of Two Column Cash Book
The posting of cash columns will be the same as it was done

in the simple cash book. Each item of discount account appearing
on the debit side of the cash book, will be posted to the credit of
respective personal account and total of discount column should be
posted to the debit side of discount account with the words 'To
Sundries" and vice-versa . Similarly cash item of discount received
appearing on the credit side of the cash book in the discount column
will be posted to the debit side of the concerned personal account
and total of discount column should be posted to the credit side of
the discount account with the words "By Sundries".
Exercise (2)
The following transactions are occurred during the month of June 2010.
June 1. Cash in hand IDs 8900000

3. Bought goods for cash IDs 4300000
5. Paid for wages IDs 4100000
7. Withdrew from bank for expenses IDs 7500000
8. Cash paid to Yousif IDs 1950000
- Discount allowed IDs 50000
10. Cash sales IDs 13500000
13. Received cash from Bashar IDs 3900000
- Discount Allowed IDs 100000
15.Purchased goods from Rahim on credit IDs 200000
16.Paid for postage stamps IDs 150000
18. Amount introduced as capital IDs 5000000
21. Received cash from Rajab IDs 7840000
- Discount allowed (IDs 160000)
24. Paid cash for travelling expenses IDs 120000
26.Amount paid into Bank IDs 2500000
27.Cash paid to Ahmed IDs 975000
- Discount allowed by him (IDs 25000)
28.Credit purchases from Mohamed Ali IDs 3000000
30.Cash purchases IDs 1500000
30.Paid salaries IDs 2800000
30.Deposited into Bank all cash in excess of IDs 2000000
Required:
Enter the above transactions into a two column cash book.

Cash Book
Date Particulars Discount Amount Discount Amount
R L IDs IDs Date Particulars R. L IDs IDs
F F
N N.
2010 2010
Jun1. To balance b/d 8900000 June3 By Purchases 4300000
7.. To Bank 100000 7500000 5 By Wages 4100000
10. To sales 13500000 7 By Yousif 50000 1950000
13. To Bashar 3900000 16 By Postages 150000
18. To capital 5000000 24 By Travelling 120000
21. To Rajab 160000 7840000 26 By Bank 2500000
27 By Ahmed 25000 975000
30 By Purchases 1500000
30 By salaries 2800000
30 By Bank 26245000
260000 46640000 75000 46640000
2010 To balance b/d 260000 2000000 2010 By balance b/d 75000

July.1 July.1
►Triple Column Cash Book
Or Cash Book with Discount, Cash and Bank Columns
With the development in banking industry, many payments
are made and received through cheques. In such cases the cash book
should have a Bank column in addition to the cash and discount
columns . Such type of a cash book is known as three column or
triple column cash book; the following points are to be kept in mind
at the time of preparation of three column cash book:
1. Cash Paid in to Bank
2. Cash Withdrawn from Bank
3. Receipt of Cheque
4. Payment of Cheque
5. Dishonored Cheque
6. Bank Charges and payments made by the bank on behalf of
the customer.
Format of a Three Column Cash Book
Date particulars R. LF Discount Cash Bank Date particulars V. LF Discount Cash Bank
N IDs N IDs
B-The Petty Cash Books ‫سجل صندوق النثرية‬
A business can have two types of payments:
(1)Major payments
(2)Minor payments
Major payments are entered in the cash book. Minor payments
are entered in the petty cash book. Minor cash payments are termed
as "petty" that is small payments. This petty cash book is also
known as analytical petty cash book.
At the end of the month, a journal entry is passed in the journal
proper by debiting all the expenses accounts with their respective
totals and giving corresponding credit to "Petty Cash Account".
The main cashier passes an entry in the journal as
Date Particulars Dr. Cr.
Expenses A/c Dr xx
To Petty cash A/c xx
The total of each head of expenditure is posted to the debit side

of the respective account in the ledger, so that the double entry is
complete.
Format of an analytical petty cash book
Cash Date Particular V. L. Total Postage Printing Cleaning Cartage Office Travelling Ledger
Received No F. Payments and and exp. exp. exp. A/cs
Teleg. Stationery
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
NOTE
Minor payments are entered in the petty cash book, at the end
the month, a journal entry is passed in the journal proper by
debiting all the expenses accounts and credit petty cash account.
Exercise (3)
The following transactions are incurred through the month of

January 2010.
2010 IDs
Jan. 1 Cash received for petty cash payments 800000
Jan. 3 Paid for postage 30000
Jan. 4 Paid for telephone exp. 100000
Jan. 5 Paid for telegram 10000
Jan. 13 Paid for stationery 40000
Jan. 16 Paid for travelling expenses 120000
Jan. 19 Donated for charity 50000
Jan. 20 Paid for repairs 150000
Required:
Prepare petty cash book on the advances system ( ‫نظام السلف‬
‫ )المستديمة‬from the above transactions and pass the journal entries.
Solution:
Petty cash book
Cash Date Explication Total stationery trav. telp. postage others
received payments exp. & telg
800000 2010
Jan. 1 To cash
2 By postage 30000 30000
4 By telephone exp. 100000 100000
5 By telegram 10000 10000
13 By stationery 40000 40000
16 By travelling exp. 120000 120000
19 By donation 50000 50000

20 By maintenance 150000 150000
By ending balance 300000
800000 800000 40000 120000 110000 30000 200000
Journal entries
Date Explanation Dr. Cr.
Jan. 1 Petty cash A/c Dr 800000
To Cash A/c 800000
Jan. 31 Minor expenses Dr 500000
To petty cash A/c 500000
Feb. 1 Petty cash A/c Dr 500000
To cash A/c 500000
‫دفاتر األستاذ المساعدة اآلجلة‬
For the purpose of quicker work and more turnovers, the

ledger is split into a number of subsidiary books for recording a
particular type of transactions. There are separate books for
recording credit transactions:
1. Purchases Book
2. Purchases Returns Book
3. Sales Book
4. Sales Returns Book
5. Bills Receivable Book
6. Bills Payable Book
1. Credit Purchases Book ‫سجل المشتريات‬
Purchases Book is used for recording only credit purchases

of goods in which the business deals. It is maintained by the
purchases department. It is also known as purchases day book. It is
used to write only credit purchases of goods cash purchases or
credit purchases of an asset are not recorded in the purchases book.
2. Purchases Returns Book ‫سجل مردودات المشتريات‬
It may be necessary to return some goods that the firm has
bought on credit for a variety of reasons. All returns of such goods
are recorded primarily in Return Outward Book. This book is also
known as Purchase Return Book.
Exercise (4)
The following transactions are related to Alwafa' Co. on
April 2010:
April 2. The company purchased 100 shirts by IDs 10000 each,
Invoice No. 10 from Modern factory.
23. Purchased 50 ties by IDs 3000 each from Beauty by invoice
No.120.
24.Purchased 400 trousers IDs 5000 each, from Mahmoud, invoice
No155.
25. Modern factory returned 10 shirts by Memo. No. 5.
26. Mahmoud returned 50 trousers by Memo. No. 9.
Required: Enter the above transactions into credit purchases book
and purchases returns book.
Credit Purchases Book
Date Name of Supplier L.F Invoice No. Amount IDs
2010 April 2 Modern factory 10 1000000
23 Beauty 120 150000
24 Mahmoud 155 2000000
Total 3150000
Purchases returns Book
Date Name of Supplier L.F Memo. No. Amount IDs

2010 Modern factory 5 100000
April 25
26 Mahmoud 9 250000
Total 350000
3. Credit Sales Book ‫سجل المبيعات‬
Sales Book is meant for writing up only credit sales of goods

dealt by the Business. It is maintained by the sales department. The
sales book is maintained to record only credit sales of goods in
which the business deals. Cash sales of the goods and sale of assets
are not recorded in the sales book. This book is also known as sales
Day book or sales journal.
4. Sales Returns Book ‫سجل مردودات المبيعات‬
Sales Return Book: Goods may be returned by the

customers for a variety of reasons. All goods returned from
customers are recorded in Sales Return Book. This book is also
known as Return Inward Book.
Exercise (5)
During March 2010 Modern Furniture Company has the

following transactions:
- March 6. Sold 20 chairs by IDs 8000 each to Al-Muthana
university invoice No. 145.
- March 8. Sold 80 offices by IDs 100000 each to Babel University
invoice No. 146.
-March 19. Sold 20 boards by IDs 40000 each, to Saeed invoice
No.170.
-March 28. Sold 100 book shelf by IDs 5000 each for Basrah
University, invoice No.192.
The following sales returns occurred:
- 16. Babel University returned 10 offices by credit
Memo.No.19
- 24. Saeed returned 5 boards by credit Memo. No.28.
Required:
Enter the above transactions in credit sales book and sales
returns book.
Credit Sales Book
Date Name of customer L. F. Invoice No. Amount IDs
March 6. Al-Muthana University 145 160000
8. Babel University 146 8000000
19. Saeed 170 800000
28. Basrah University 192 500000
Total 9460000
Sales Returns Book
Date Name of customer L.F. Credit Amount IDs

Memo.
March Babel University 19 1000000
16.
24. Saeed 28 200000
Total 1200000
5. Bills Receivable Book ‫سجل أوراق القبض‬

When credit sales of goods are made the purchaser gives his
guarantee to make payment in future in the form of bill. When the
seller receives such bill, it is Bill Receivable for him as he will
receive payment in future against such bill. In case a business house
receives a number of bills, a Bills Receivable Book is maintained to
record all such bills.
6. Bills Payable Book ‫سجل أوراق الدفع‬
When credit purchases are made by a firm it gives a

guarantee to the seller to make payment in future in the form of a
bill. This bill is said to be Bills Payable for the firm as he will pay
for the bill in future. A Bills Payable Book is opened to record all
such bills.
7. Journal Proper ‫اليومية الخاصة‬
It is a subsidiary book maintained to record the transaction

which cannot be recorded in other special subsidiary books. Usually
the transactions of infrequent character are recorded in the journal
proper. The entries like adjustment entries, opening entries, closing
entries, transfer entries, purchase and sale of assets on credit,
interest on capital, interest of drawing etc. are recorded in journal
proper.
Exercise (6)
The following transactions are related to commercial papers

[Notes (Bills) receivables & payables] for Amal company on April
2010:
-April 2. layeith signed a bill for Amal company at IDs 1000000
due at May, 10,2010.
- April 12. Samawah cement company received a bill from Amal
Co. IDs 500000 due after two months.
- April 20. Nabeel signed a bill at IDs 400000 due at 31/5/2010.
- April 30. Zaid signed a bill at IDs 300000 due at 30/7/2010.
- April 30. Amal company signed a bill at IDs 150000 due at
31/8/2010 for Suhail.
Required:
Enter the above transactions in Bills receivable Book and
bills payable Book.
Notes (Bills) Receivable Book
Date Name of customer (Drawee) Due date amount IDs
2010
April 2. Layeith May, 10, 2010 1000000
20. Nabeel May, 5, 2010 400000
30. Zaid July, 30, 2010 300000
Total 1700000
Notes (Bills) Payable Book
Date Name of Supplier (Drawer) Due date amount IDs
2010
April 12. Samawah Cement Co. June, 12,2010 500000
30. Suhail Aug, 31, 2010 150000
Total 650000
Exercise (7)
Record the general Journal entries for the above exercises from
(4) to (6).
Date Explanation Dr. Cr.

April 30 Purchases A/c Dr 3150000
To accounts payable 3150000
April 26 Accounts payable Dr 350000
To Purchases returns 350000
March 31 Accounts receivables Dr 9460000
To sales 9460000
March 31 Sales returns Dr 1200000
To accounts receivables 1200000
April 30 Notes receivables Dr 1700000
To Accounts receivables 1700000
April 30 Accounts payable Dr 650000
To Notes payable 650000
SUMMARY
►Subsidiary books are books of original entry as all transactions are first recorded in these
books before they are recorded in respective accounts in ledger. These special journals are
called subsidiary books. Because they are subsidiary to the principal or main books namely
ledger.
►Cash Book: Transactions held in cash or by cheque are recorded in this book. There are two
sides in a cash book. In the left hand side all cash receipts are recorded and in the right hand
side all cash payments are recorded. Cash Book is of five types: single column cash book,
double column cash book, triple column cash book, bank cash book and petty cash book.
►Purchase Book: All credit purchase of goods is written in this book. Cash purchase of
goods and credit purchase of assets are not recorded in this book. Other names of purchase
book are purchase day book, purchase journal, bought journal, inward invoice book etc.
►Purchases Returns Book is used for recording the value of goods returned to the suppliers.
►Sales Book: All sales of goods are written in this book. Cash sale of goods and credit sale of
assets are not recorded in this book. Other names of Sales Book are Sales Day Book, Sales
Journal, Sold book, Outward Invoice Book etc.
►Sales Returns Book is used for recording goods returned by the customers.. This return is
called Sales Returns Inwards.
►Bills Receivable Book is one where all bills received by the trader are entered. This book is
meant for recording the bills receivable received.
►Bills Payable Book is one where all bills accepted by the trader are entered. This book is
meant for recording Bills payable accepted and sent by us.
► Journal Proper: Even if all the books are maintained, we cannot dispense with the
maintained to record:
Opening entries.
Transfer entries.
Closing entries.
Entries to rectify errors.
Test Questions
1-What are the advantages of subsidiary Books?
2-Define a Cash Book. Is it a subsidiary Book or a principal Book
of accounts, Explain?
3-What do you mean by a three column Cash Book ? Give a
specimen of it.
4-Explain the imprest system of petty Cash Book ? How it differs
from a Cash Book.
5-Name six subsidiary books?
6-Explain the usefulness of subsidiary books?
7- Cash account is credited by:
a. amounts collected cash.
b. amount paid cash,
c. credit purchases.
d. d-credit sales.
8-If the total of debits ......... the total of credits for(x) account, the
balance is debit:
a. less than,
b. More than.
c. Equal.
d. We cannot determine.
9-……….. is an individual accounting record of increases and
decreases in specific asset, liability and owner's equity item.
a- Accounting.
b- Transaction,
c- Ledger.
d- Account.
10-Accounts that normally have credit balances are:

a- assets, expenses, and revenues,
b-assets, expenses, and owner's capital,
c-assets, liabilities, and owner's drawings,
d-Liabilities, Revenues and Capital.
11-Which of the following is not part of the recording process?

a- analyzing transactions.
b- entering transactions in journal,
c- preparing a trial balance.
d- posting transactions.
12-Transaction Analysis:
a- transfers ledger transaction data to the journal,
b- is an optional step in the recording process,
c- Transfers journal entries to ledger accounts,
d- normally occurs before journalizing.
13-……….. is a list of accounts with their balances at a given time.
a- Journal.
b- Ledger,
c- Trial balance.
d- Posting.
14- In subsidiary books:

a- similar transactions are accumulated,
b- Record the party that is not similar.
c- General journal entries are recorded in general journal books
at the end of the period,
c- all of the above.
15-All the following reveal in bills (notes) payable book except:

a- face value of the bill payable,
b- maturity date,
c- client's (customer's) name,
d- Payee.
16-The credit side from general journal entry for credit purchases
is:
a- Purchases A/c.
b- Accounts payable.
c- Accounts receivable.
e- Notes payable.
17-The Company usually uses a petty cash to:
a- pay for major expenses,
b- pay for minor payments,
c- collect minor cash receipts,
d- None of all the above.
18-All of the following books are credit books except:

a. cash book,
b. purchases returns book,
c. credit sales book
d. Notes payable book.
19-The following is cash account

Cash A/c
Particulars Amounts Particulars Amounts
IDs IDs
Balance June, 2010 3000000 by Ahmad 1000000
To sales 2000000 by purchases 3000000
To capital 3500000 by telephone expenses 100000
To Falih 500000
Required:
1 - Find the balance of cash account.
2-Record the above entries showed in cash account and then write their
transactions.
3- Is Ahmad a supplier or a customer? Why?
4- Is Falih a supplier or a customer? Why?
20-The following transactions are occurred during the first half
of March 2010 for Al-Jabery stores:
March 1. The stores sold goods to Dahoud on account IDs
10,000000.
2.Pay stores' rent IDs 1000000 cash.
3.Purchased from Akram goods IDs 8000000 on credit.
4.Dahoud paid from his account IDs 3000000.
5.Purchased good cash IDs 10000000, 10% purchases
discount.
6.Sold goods cash IDs 20000000, 5% sales discount.
7.Purchased goods from Ibrahim IDs 1000000 on account.
10.Akram returned goods IDs 3000000.
11.Paid telephone expense IDs 500000 cash.
12.Dahoud paid IDs 2000000 cash.
13.Purchased a car from Hyundai Co. IDs 5000000 on
account.
15. Al-Jabery stores signed a promissory note for Hyundai IDs
2000000 and paid the rest cash.
Required:
1-Post the above cash transactions to cash book.
2-prepare:
(a)Credit sales book.
(b) Sales returns book,
(c)Credit purchases book.
(d)Purchases returns book.
3-Record the general journal entries for totals in (2) above.
21-The following transactions are:
- 2010 Jan 1. Purchased goods from Maher of the list price of

IDs 40000000 less 10 % Trade Discount.
- Jan. 5 Sold goods to Raheem for IDs 10000000.
- Jan. 6 Returned goods to Maher list price of IDs 5000000.
- Jan. 7 Nehad sent goods for IDs 30000000.
- Jan. 8 Sold goods to Salman for IDs 12000000.
- Jan. 19 Sent goods to Rashad IDs 5000000 .
- Jan. 24 Sold goods to Harpi for IDs 8000000
Required: enter the above transactions into proper subsidiary
books on Jan. 30 and posting into the Ledger.
22-Enter the following transactions in Subsidiary Books and

post them into ledger and prepare a Trial balance on 30 - 6 –
2010.
-June 3 Purchased goods from Murad IDs 400000.
- June 5 Sold goods to Dawood IDs 420000.
- June 6 Returned goods to Murad IDs 40000 .
- June 8 Kareem purchased goods from us IDs 200000.
- June 10 Received goods returned by Dawood IDs 25000 .
- June 12 Emad sold goods to us IDs 300000.
- June 13 Sold goods to Nayeem IDs 250000.
- June 18 Returned to Emad goods IDs 30000.
- June 20 Kareem returned goods IDs 20000.
- June 29 Kareem Purchased goods from us for IDs 100000.
- June 30 Saleem purchased goods from us IDs 75 000.
23- Record the following transactions in the proper subsidiary
Books and prepare necessary ledger accounts:
- 2010 April 1 Purchased goods from Rasheed IDs 40000000 .
- April 1 Rehman sold us goods IDs 500000.
- April 3 Bought goods from Arkan IDs 750000.
- April 4 Sent invoice to Waleed IDs 200000.
- April 5 Returned goods to Rehman IDs 100000.
- April 8 Purchased goods from Ashraf IDs 500000 .
- April 10 Received an invoice from Mousa IDs 700000.
- April 14 Sent credit note to Ashraf for IDs 100000 for goods returned.
- April 17 Sold goods to Raheem IDs 1000000 less 10% Trade discount.
- April 25 Raheem returned goods to us IDs 250000.
- April 26 Returned goods to Ashraf IDs 50000.
- April 28 Purchased Typewriter IDs 250000.
- April 30 Bought goods from Ahmad for cash IDs 1200000.
24-Enter the following transactions in the proper subsidiary
Books and prepare necessary ledger accounts:
- 2010 Feb. 1 Purchased goods from Ibrahim IDs 400000.
- Feb. 2 Bought goods from Ayman IDs 300000.
- Feb. 4 Sold goods to Ahmed IDs 250000.
- Feb. 6 Ahmed returned goods IDs 50000.
- Feb. 8 Sold goods to Muhand IDs 400000.
- Feb. 9 Salaman sold goods to us IDs 800000.
- Feb. 10Ahmed returned goods to us IDs 25000.
- Feb. 12 Sold goods to Talal IDs 1000000.
- Feb. 14 Bought goods from Nour IDs 1350000.
- Feb. 15 Sold goods to Bilal IDs 500000.
- Feb. 15 Returned goods to Salaman IDs 50000.
- Feb. 25 Ayman received goods returned by us IDs 100000.
25- Enter the following transactions in Purchases Book. Sales
Book and Returns Books of Ahmed &Co., and prepare
necessary ledger accounts:
- 2010 March 1 Bought from Shafiq goods worth IDs 2000000 less 5% trade
discount.
- March 2 Bought office furniture for cask IDs 500000.
- March 3 Ibrahim sold to us goods IDs 400000.
- March 4 Sold goods for IDs 5000000.
- March 5 Sold goods to Mahmoud worth IDs 500000.
- March 8 Made cash purchases IDs 250000.
- March 10 Returned goods to Ibrahim IDs 100000.
- March 15 Goods returned by Mahmoud IDs 250000.
- March 20 Withdrew from the bank for meeting office expenses IDs 225000.
- March 25 Purchased goods from Ismail IDs 400000.
- March 28 Paid for advertisement IDs 50000.
- March 30 Sold goods to Iman IDs 450000.
26-You are asked to record the following transactions in the
subsidiary Books of Rassoul &Co., and post them to the
respective ledger accounts:
- 2010 April 1 Purchased goods worth IDs 30000000 less 5% trade Discount
from Amman Brothers
- April 2 invoiced goods worth IDs 15000000 less 5% trade Discount to
Mohamed & Co.
- April 5 Returned goods to Bagdad Brothers IDs 3000000 (gross value) as they
were defective.
- April 7 Raissan invoiced goods to us IDs 25000000 on 3% Trade Discount.
- April 14 Returned goods us by Mohamed & Co., IDs 2000000 (gross value) .
- April 25 received an order for the supply of goods for IDs 20000000 from
Rassoul &Co.
- April 28 Placed a purchase order with Khalid & Co., for the supply of goods
for IDs10000000.
27- Record the following transactions in the proper subsidiary
books of Sajad and Brothers and post them to the respective
ledger accounts:
- 2010 April 1 Sold goods to Hameed on credit IDs 20000000 .
- April 3 Sold goods to Suham & Co., on credit IDs 18000000 less 5% Trade
Discount.
- April 5 Received an order for the supply of goods IDs 10000000 from Bagdad
LTD.
- April 7 Returned goods IDs 3000000 of gross value by Suham &Co. as they
were damaged.
- April 9 Cash sale of goods IDs 30000000.
- April 10 Return of goods IDs 2500000 from Hameed since they were not as
per sample.
- April 15 Executed the order received from Bagdad Limited on 5 th April.
- April 18 Cash purchases IDs 9500000.
- April 20 Credit purchase of office furniture of IDs 12000000 from Quality
Limited.
- April 27 Purchased goods IDs 11000000 from Ismail and Sons on credit.
- April 30 purchased steel Tables IDs 20000000 on credit from Salam sales
centre.
28- Enter the following transactions in a Simple Cash Book:
- 2010 Jan. 1 Cash at hand IDs 10000000.
- Jan. 3 Received from Husham IDs 500000.
- Jan. 7 Received from Khalid IDs 370000.
- Jan. 8 Made cash purchases IDs 250000.
- Jan. 10 Paid to Maher on account IDs 750000.
- Jan. 17 Sold goods to Sajad for cash IDs 250000.
- Jan. 20 Paid in to bank IDs 2000000.
- Jan. 22 Purchased furniture for office use IDs 200000.
- Jan. 25 Received interest IDs 40000.
- Jan. 27 Paid Electricity charges IDs 100000.
- Jan. 29 Paid Rent IDs 500000.
- Jan. 31 Paid Salaries to staff IDs 750000.
29- Enter the following transactions in the Cash Book having
Cash and Discount columns for the month of February.
- 2010 Feb. 1 Cash balance IDs 7500000.
- Feb. 2 Purchased goods for cash IDs 4000000.
- Feb. 2 Paid for Freight JDs 25000.
- Feb. 8 Cash sales IDs 6000000.
- Feb. 12 Paid the Mr. Ayman IDs 5000000. He allowed discount IDs 25000.
- Feb. 14 Salam settled his account of IDs 850000 by giving us cash IDs
825000.
- Feb. 16 purchased office furniture IDs 250000.
- Feb. 20 Received from Mr. Rashee & Co. IDs 600000 in full settlement of IDs
650000.
- Feb. 27 Paid for printing and stationery IDs 85000.
30-Enter the following transactions in the Cash Book for the

month of March 2010, and post them into the ledger:
- 2010 March 1 Commenced business with IDs 10000000.
- March 5 Purchased goods from Rahman for cash IDs 5000000.
- March 9 Purchased goods from Nasser on credit IDs 3500000.
- March 11 Sold goods to Jameel for cash IDs 5000000.
- March 15 Purchased stationery for office IDs 50000.
- March 16 Paid to Abdul Nasser on account IDs 2000000.
- March 20 Received commission IDs 75000.
- March 24 Paid for advertisement IDs 50000.
- March 28 Paid for Rent IDs 250000.
- March 30 Paid for Salaries IDs 1000000.
- March 31 Deposited in bank all cash after retaining IDs 20000 at hand.
31- Write up the Cash Book of Bader for the month of January
2010:
- 2010 January 1 Cash at hand IDs 4000000.
- Jan.3 Received cash from kareem IDs 2500000. Allowed him discount IDs
20000.
- Jan.Paid to Rassim IDs 800000 in full settlement of his account of IDs 85000.
- Jan.Cash sales IDs 5000000.
- Jan.11 Paid to Ismail IDs 890000. Received discount from him IDs 10000.
- Jan.15 Paid to Waleed IDs 400000 in full settlement of his account for IDs
410000.
- Jan.18 Received from Ashraf IDs 750000. Allowed him discount IDs 25000.
- Jan.22 Paid commission IDs 55000.
- Jan.25 Drew for personal use from bank IDs 275000.
- Jan.27 Purchased a typewriter IDs 250000 for office use.
- Jan.29 Paid for salaries IDs 500000.
- Jan.30 Purchased goods for cash IDs 1700000.

No. a b c d
7 x
8 x
9 x
10 x
11 x
12 x
13 x
14 x
15 x
16 x
17 x
18 x

CHAPTER
(8)
COMMERCIAL PAPERS
(NOTES)
1- CHEQUES
2- PROMISSORY NOTE
3-BILL OF EXCHANGE
CHAPTER
(8)
COMMERCIAL PAPERS (NOTES)

‫األوراق التجارية‬
Commercial paper an unsecured, short-term debt instrument

issued by a corporation, typically for the financing of accounts
receivable, inventories and Meeting short-term liabilities.
Commercial paper is generally issued by corporations or by

large banking institutions. The main function is usually to provide
funds for the company’s Accounts Receivable in order to handle
short-term obligations.
Commercial paper is a certificate acceptable for exchange as

a payment instrument through endorsement (‫ )تظهير‬or delivery
(‫)تسليم‬.
The kinds of Commercial papers are the following:
1-Cheques.
2-Promissory notes.
3-Bill of Exchange.
1- CHEQUES ‫شيكات‬
Cheque is an orderly written paper from the drawer (‫)الساحب‬

to drawee )‫( (المسحوب عليه‬a bank) to pay a specified amount of
money at sight for a third party the drawer or the bearer (‫ )الحامل‬or
beneficiary(‫(المستفيد‬.
2- PROMISSORY NOTE ‫ورقة كمبيالة‬
Promissory Note is a certificate the maker obliged himself to

pay amount of money at sight or at a certain date for a beneficiary.
If the maker of a promissory note is a merchant the promissory note
will be a commercial paper.
Promissory notes are a form of debt similar to a loan.
Companies issue these notes to finance any aspect of their business,
from launching new products to repaying more expensive debt. In
return for the loan, companies agree to pay investors a fixed return
over a set period of time.
3-BILL OF EXCHANGE ‫ورقة سحب‬
Bill of exchange is unconditional written order (instrument)

made by a drawer to a drawee to pay a specified amount of money
for a third party either a bearer or the beneficiary on demand or at a
fixed or determinable future date.
Bill of exchange is a commercial paper not a financial paper
since it is a result of business transactions.
Legally, cheque is a bill of exchange drawn on a banker,
payable on demand.
In practice, check is a direction in writing to a bank to pay a
stated sum of money on demand to a named person or organization,
or to his or their order, or to bearer.
In practical accounting profession, cheques are treated as
cash. Promissory notes and withdrawals are either a note receivable
for the payee (receiver) or a note payable for the maker (issuer).
Exercise (1)
Ismail Mussa Company sold goods at IDs 4000000 for AL-
Taqwa Company with a promissory note due after three months.
The journal entry in books of Ismail Mussa Co. is:
Notes receivable A/c Dr 4000000
To sales A/c 4000000
The journal entry in Al-Taqwa company is:
Purchases A/c Dr 4000000
To notes payable A/c 4000000
Notes receivables are assets while notes payable are

liabilities.
Exercise (2)
Suppose a note receivable was written to settle (‫ يسدد‬،‫ )يسوي‬an

open account receivable, the entry of the receipt of the note at payee
journal book is:
Notes receivable A/c Dr 3000000
To accounts receivable A/c 3000000
The journal entry at the issuer journal book is:
Accounts payable A/c Dr 3000000
To notes payable A/c 3000000
Exercise (3)
The balance sheet presentation of receivables:
Particulars Amounts IDs

Notes receivables 16000000
Accounts receivables 34000000
Other receivables 3000000
Total receivables 53000000
Less: Allowance for doubtful account (13000000)
Net receivables 40000000
SUMMARY
►Commercial Paper (CP) is an unsecured money market

instrument issued in the form of a promissory note.
►Cheques are written orders from account holders instructing their

banks to pay specified sums of money to named beneficiaries. They
are not legal tender but are legal documents and their use is
governed by the Bills of Exchange.
►Promissory note is a written promise to pay a sum of money to a

specific person at a particular time in the future.
►Bill of exchange An unconditional order issued by a person or

business which directs the recipient to pay a fixed sum of money to
a third party at a future date. The future date may be either fixed or
negotiable. A bill of exchange must be in writing and signed and
dated. Also it is called draft.
Test Questions
1-Define a cheque, promissory note, bill of exchange.

2-Which of the following statements is correct about promissory
notes?
a- The party making the promise to pay is called the payee.
b- The party to whom payment is to be made is called the maker.
c- A Promissory note is a negotiable instruction.
d- A Promissory note is more liquid than an account receivable.
3-If cement company accepts IDs 1000000, 3- month, 10%
promissory note in settlement of an account. The entry to record
this transaction is to debit:
a- Notes receivable by 1030000 IDs.
b- Notes receivable by 1000000 IDs.
c- Accounts receivable by 1030000 IDs.
d- Accounts receivable by 1000000 IDs.
4-If Arabic Emirates Company holds $ 10000000, 120-day, 9% note,
the entry made by the Arabic Emirates company is to credit:
IDs
a- Cash 10300000
b- Notes receivable 10300000
c- Notes receivable 10000000
Interest revenue 300000
d- Cash 9700000
Interest expense 300000
5-We credit cash in bank in the following except:
a- Purchase goods by cheque,
b- Pay salaries by cheque,
c- Collect a revenue by cheque,
d- Pay a liability by cheque.
6-The promissory note is a note payable when:

a- Sale an asset by a promissory note.
b- Collect a revenue by promissory note.
c- A client pays his obligation by endorsing a promissory note.
d-An expense is settled by a promissory note.
7-Which of the following are not from commercial papers?

a- Accounts receivable
b- Cheques.
c- Promissory note
d- Withdrawals
8-When a company purchased a machine by a promissory note we

credit:
a-A machine A/c
b-Notes receivable
c-Notes payable
d-Cash
9- (a)Yasser Mussa purchased goods IDs 5000 on credit from
Mohamed Ahmed 10% trade discount on 2 nd, March 2010.
(b)Mohamed signed a promissory note to settle his obligation for
Yasser.
Required:
(1)Record the above two transactions in Yasser journal and then in
Mohamed journal.
(2)Post the transactions to ledgers accounts for both of them.
No a b c d
2 x
3 x
4 x
5 x
6 x
7 x
8 x

CHAPTER
(9)
ERRORS
CLASSIFICATION
AND RECTIFICATION
1-CLASSIFICATION OF ERRORS
2-GENERAL CLASSIFICATIONS
4-SUSPENSE ACCOUNT
CHAPTER
(9)
ERRORS
CLASSIFICATION
AND RECTIFICATION
‫تصنيف وتصحيح‬: ‫األخطاء‬
Mistakes or errors which are committed) ‫ (ترتكب‬in writing
the accounting entry or amount on wrong side of the ledger account,
or failing to pass one effect in account etc.., are considered as
accounting errors. Such errors are required to be corrected as soon
as they are detected .Some errors are disclosed by checking the
accounts, whereas some errors are disclosed by Trial Balance.
1-CLASSIFICATION OF ERRORS ‫تصنيف األخطاء‬
Accounting errors are classified as:

►Errors relating to Agreement of Trial Balance
‫األخطاء المتعلقة بمطابقة ميزان المراجعة‬
A- Errors not disclosed by the Trial Balance
‫األخطاء غير المكتشفة في ميزان المراجعة‬
Although, the totals of the Trial Balance are equal, some
mistakes may remain undetected )‫(غير مكتشفة‬. The agreement of a
trial balance is not affected due to (‫ )ناتج عن‬the following errors:-
(1) Complete omission of a transaction ‫الحذف الكامل للعملية‬
If any particular transaction is not recorded at all, it would

not affect the agreement of a Trial Balance. Such type of errors is
not disclosed by a Trial Balance.
(2) Recording of wrong amounts on both sides ‫التسجيل الخطأ للمبلغ‬

‫في الجانبين‬
If wrong amounts of the transaction are entered on both the

sides of ledger accounts, it would not be disclosed by the Trial
Balance.
Example: Good worth 570000 IDs from Amar Trading, was
written in the Journal book 750000 IDs instead of 570000 IDs, in
this case the trial balance will tally (‫)يتساوى‬.
(3)Errors of omission ‫اخطاء الحذف‬

If a transaction has been completely omitted to be recorded in
the books of original entry and in the ledger, it is called error of
omission. This error will not be disclosed by trial balance.
(4) Posting to wrong heads of accounts ‫أخطاء في اسم الحساب‬
If posting from the journal to ledger is made to the wrong
account with the same amount, this error will not be disclosed by
the Trial balance.
Example: Purchased furniture for cash IDs 1200000, was
posted to the debit side of the machinery account instead of
furniture account.
(5)Compensating Errors ‫األخطاء المعوضة‬
When one mistake nullifies ) ‫ (يلغي‬the wrong effect of
another, it is called a compensating error: The trial balance fails
)‫(يخفق‬to disclose them. These errors are generally arithmetical
errors.
Example: The debit side of Khalid’s account is overcast by
IDs 100000; at the same time of the credit side of Khalid’s account
is also overcast by IDs 100000.
B. Errors disclosed by the Trial Balance

‫اخطاء يكتشفها ميزان المراجعة‬
The agreement of the Trial balance may be affected by one or
more of the following types of mistakes:-
1- Partial omission of a transaction ‫اخطاء السهو الجزئي‬
If the transaction is recorded in the Journal but by mistake it
is not posted in the ledger, the Trial balance will not agree.
Example: Cash received from Salem IDs 200000, this
amount is entered properly in the cash book, but it is not posted to
the credit side of Salem’s account.
2- Posting of the wrong amount ‫الترحيل الخطا للمبالغ‬
If posting is made of a wrong amount from journal to ledger,
the Trial balance will disagree.
Example: Purchased goods on credit from Hussein IDs
150000, was entered correctly in the purchases account, but it
posted by 50000 instead of 150000 IDs to credit side of Hussein’s
account. The credit column of trial balance will be less than the
total column by 100000 IDs.
3- Posting on the wrong side of a account ‫اخطاء الترحيل الى جانب خطأ‬
‫من حساب‬
When the transaction is posted to the wrong side of an
account in the ledger, it causes disagreement in the trial balance.
Example: Amount of IDs 250000 is received as interest, this
amount was correctly recording in the cash book, but it is entered in
the debit side of interest’s account instead of credit side in the same
account.
4- Wrong totaling or balancing ‫اخطاء الجمع او الترصيد‬
If a ledger account is wrongly totaled up or wrongly
balanced, the trial balance will not tally.
2-GENERAL CLASSIFICATION ‫التصنيف العام‬

A. Clerical or Technical Errors ‫اخطاء كتابية او فنية‬
These are human errors arising during the course of recording

the transactions. These types of errors can be further subdivided
into four.
(1) Errors of Omission ‫اخطاء الحذف‬
This is an error of omission of recording a transaction in the

books of accounts. Omission may either be complete or partial. It is
said to be a complete omission when the transaction is not recorded
at all in the books of accounts. Complete omission does not affect
the agreement of a Trial balance.
For example, Machinery purchased for IDs. 50000 by
issuing a cheque is recorded first in the credit side of cash book, in
the bank column. Suppose it is not posted to the debit of machinery
account, it is an error of partial omission. The trial balance will not
tally. Suppose the transaction is not entered in the cash book and
hence ignored completely, this is a case of complete omission. It
means as if the transaction has not taken place at all. It will not
affect the trial balance and hence the trial balance will tally. This is
true only in case of complete omission.
(2)Errors of Commission ‫أخطاء ارتكابيه‬
Such errors arise when wrong amount is written in the books

of original entry. These errors may be committed at the time of
recording and/or posting. In this error both the aspects amount is
wrongly entered therefore this error will not be disclosed by the
trial balance.
For example, an amount of IDs 10000 received from
customer (Debtor) is correctly recorded on the debit side of the cash
book but while posting, the customer's account is credited with IDs
1000. This is an error, which is committed at the time of posting, by
posting wrong amount to the account. This will result in
disagreement of trial balance, since; the credit total of the trial
balance will be short by IDs 9000.
(3)Error of Duplication ‫أخطاء مكررة‬
This Error means recording the same transaction twice in the
original books of entry and also posting it to the ledgers, such errors
do not affect the agreement of trial balance.
(4)Compensating Errors ‫أخطاء معوضة‬
When two or more errors are committed in such a way that the
net effect of these errors on the debits and credits of accounts is nil,
such errors are called compensating errors. They do not affect the
tallying of the trial balance.
For example, In a credit sale transaction, the sales account is
credited in excess by say, IDs.5000 and similarly the suppliers
account in case of a credit purchase is understated by IDs.5000; this
is a case of two errors compensating for each other’s effect.
B. ERRORS OF PRINCIPLE ‫أخطاء فنية‬
When a transaction is recorded against the fundamental

principles of accounting, it is an error of principle.
For example, if revenue expenditure is treated as capital
expenditure or vice versa. Another example, amount spent on
additions to the buildings should be treated as capital expenditure
and must be debited to the asset account. Instead, if this amount is
debited to maintenance and repairs account, it is treated as a
revenue expense. This is an error of principle.
3- RECTIFICATION OF ERRORS ‫تصحيح األخطاء‬
(A)Errors affecting one Account
These types of errors may occur due to the following reasons:-
1. Wrong Castings ‫أخطاء التنظيم‬

2. Wrong balancing ‫أخطاء الترصيد‬
3. Wrong posting ‫أخطاء الترحيل‬
These errors are not difficult to locate. They are located

during the course of preparation of the trial balance; hence there is
no need to pass any journal entry to rectify these errors. The error is
rectified by giving proper explanatory note or by crossing the
wrong figure with red ink line and writing the correct figure a above
the crossed out figures.
(B) Errors affecting two or more accounts
Such errors may include:-
1. Errors of Omission
2. Errors of Recording
3. Errors of posting to wrong account
4. Errors of principle.
There are two methods to rectify the errors:-
1. Long Method ‫الطريقة المطولة‬
According this method there are four steps to rectify the

errors;
(1)Pass the wrong entry
(2) Pass the Reverse of the wrong entry
(3) Pass the correct entry
(4) Combine or reconcile reverse entry and correct entry to find out
rectification entry.
Exercise (1)
Rent of IDs 500000 paid to Ismail by cash has been debited

to his personal account. This type of error is principle, to rectify this
error; following procedure is to be adopted.
Steps of Rectification(2,3,4)
Reverse entry Correct entry Rectification entry
(2) (3) (4)
Cash A/c Dr 500000 Rent A/c Dr 500000 Rent A/c Dr 500000
To Ismail A/c 500000 To Cash A/c 500000 To Ismail A/c 500000
►ERRORS DISCLOSED AND NOT DISCLOSED BY

THE TRIAL BALANCE
Errors disclosed by the Trial Errors not disclosed by the
Balance Trial Balance
1. Wrong totaling of subsidiary book 1. Errors of Principle
2. Omission to post an amount into 2. Errors of Omission
the ledger.
3. Omission to transfer a balance to 3. Errors of Commission
the Trial Balance.
4. Posting of wrong amount 4. Compensating errors
5.Wrong balancing of ledger 5. Error of posting to a
accounts. wrong account but on the
6.Posting on the wrong sides. correct side
7.Transferring a balance to the
wrong side of the Trial Balance.
►Procedure for locating the error:

When the trial balance disagrees, the following steps can be
taken to discover the error:
1. Checkup the totals of both sides of the Trial balance once again.
2. See whether any ledger balance has been left out of Trial balance.
Find the difference between the two totals.
3. Divide the difference of Trial balance by two. See, whether an
account leaving the same figure has been recorded wrongly in the
other column - Debit as credit or vice -versa.
4. Compare the balances entered in the Trial Balance with the
balances as disclosed by the several ledger accounts.
5. See no balance has been omitted while extracting from the
ledger.
6. See that no debit balance has been taken out as credit or vice -
versa.
7. Compare the present Trial Balance with that of the previous one
and see whether any ledger account has been omitted to be included
in this year's books.
8. Totaling and balancing of all ledger accounts should be re-done.
9. If the error is still undetected, Checkup all the subsidiary books
and their postings.
10. Watch all carry forwards and all opening balances with the help
of the previous Balance Sheet.
In spite of all the above checks, the errors could not be
located, place the difference in a suspense account, and tally the
Trial balance. But all efforts should be made to locate the errors and
rectify them as early as possible.
2. Short Method ‫الطريقة المختصرة‬
According this method, the error is rectified direct by only
one accounting entry. The following table contains the procedures of
correction of the errors.
Error Rectification
1. If an account is not debited Debit that account
2. If an account is not credited Credit that account
3. If an account is wrongly debited Credit that account
4. If an account is wrongly credited Debit that account
5. Excess (over) debit in an account Credit that account
6. Excess (over) credit in an account Debit that account
7. Short (under) debit in an account Debit that account
8. Short (under casting) Credit in an account. Credit that account.
Exercise (2)
Pass journal entries to rectify the following errors by short

method:
1. An amount of IDs 780000 paid for erection of Machinery was
debited to Wages A/c.
2. Credit purchase of goods worth IDs 1500000 from Rahem was
wrongly entered to Sales A/c.
3. Paid Rent IDs 158000 to Kamel was wrongly debited to his
personal account.
4. An amount of IDs 150000 received as commission was wrongly
credited to interest A/c.
5. Paid general expenses IDs 181000, same were posted to ledgers
as IDs 118000.
6. An amount of IDs 2500000 received from Nedal was posted to
the credit of Nael IDs 2500000
7. A payment of IDs 650000 for salaries has been posted twice to
salaries A/c.
Rectification of Errors
Date Debit Credit
Particulars IDs IDs

1 To Wages A/c 780000
(Correction of wrong debit given to wages A/c)
Sales A/c Dr 1500000
2 Purchase A/c Dr 1500000
To Rahem's A/c 3000000
(Correction of wrong effect given to sales A/c)
Rent A/c Dr 158000
3 To Kamel's A/c 158000
(Correction of wrong effect given to personal A/c)
Interest A/c Dr 150000
4 To Commission A/c 150000
(Correction of wrong effect given to interest A/c)
General expenses A/c Dr 63000
5 To Cash A/c 63000
(Being under debit given to general expenses and
under credit given to cash A/c corrected )
Nael A/c Dr 2500000
6 To Nedal's A/c 2500000

(Correction of wrong effect given to Nael's A/c)
No journal entry is required. This is one side error.
7 Here excess debit is given to salaries A/c to the
Salaries A/c by IDs 650000.
4-SUSPENSE ACCOUNT ‫الحساب المعلق‬
When trial balance does not tally, the difference is put into
a newly opened account named suspense account and the trial
balance is thus made to tally. In case, the debit side exceeds the
credit side the difference is put on the credit side of suspense
account and it is posted on the liability side of the balance sheet.
Likewise, if the credit side of the trial balance exceeds the debit
side, the difference is put on the debit side of suspense account and
it is posted to the asset side of the balance sheet.It may be noted that
suspense account is used to rectify those errors which affect the trial
balance.
Exercise (3)
Upon drawing his Trial balance at the end of 2010, A Trader
finds that it shows a short debit of IDs 13700000. On checking the
books, you find that:-
-The Sales Book has been under cast by IDs 5000000.
-The Trial balance does not include the balance at bank of IDs
20000000.
-Discount allowed to customers IDs 300000 has not been posted to
their accounts.
-A credit purchase of IDs 1000000 has not posted to the account of
the supplier (creditor).
Required:
(1)Pass journal entries to rectify the errors.
(2) Prepare the Suspense A/c .
Solution:
N0. Transactions Dr. Cr.

Suspense A/c Dr. 5000000
1 To Sales A/c 5000000
Bank A/c 20000000

2 To Suspense A/c 20000000

3 To Customers A/c 300000

4 To Creditors A/c 1000000
Dr. Suspense A/c Cr.

Particulars Amounts Particulars Amounts
By Bank 20000000
To Balance (b/d) 13700000
To Sales 5000000
To Customers 300000
To Creditors 1000000
20000000 20000000
Exercise (4)
The Trial Balance of Mr. Ali shows a difference of IDs

689000 in the debit column and is made to agree by putting this
difference against a suspense account, later the following errors
were discovered.
1.Goods worth IDs 450000 were sold to Rahim on credit.
This was recorded in the Sales Book but was not posted to Rahim's
account in the ledger .
2. Goods worth IDs 225000 were returned by Maher. The
amount was credited to his account but was not entered in the
Return Inwards Book.
3. Saleem stores paid IDs 660000 but their account was
credited for IDs 606000.
4. Goods worth IDs 125000 purchased from Shareef were
wrongly entered in the Sales Book.
5. An amount of IDs 220000 owed by Hashim was omitted
from the list of Sundry Debtors.
6. The Purchase Book was overcast by IDs 152000 .
Required:
Rectify the above transactions and prepare a Suspense

Account.
Journal proper
Debit Credit
IDs
Date Particulars L.F IDs
l Rahim's A/c Dr 450000

To Suspense A/c 450000
(Sale of goods to Rahim on credit now
posted to his account)
2 Returns Inwards A/c Dr 225000
(Returns inwards account was now debited
for Returns inwards)
3 Suspense A/c Dr 54000
To Saleem stores 54000
(Under posting of cash paid by Saleem
stores set right)
Sales A/c Dr 125000
To Shareef s A/c 250000
(purchase of goods from Shareef wrongly
entered in the Sales Book now set right)
5 Sundry Debtors A/c Dr 220000
( Hashim’s debit balance Omitted from
debtors set right)
(Purchases book overcast by IDs 152000 is
set right)
SUSPENSE A/c
Date Particulars L.F Amount Date Particulars L.F Amount

IDs IDs
To Balance b/d 689000 By Rahim 450000
To Saleem Stores 54000 By Returns inwards 225000
To Purchases 152000 By Sundry Debtors 220000
895000 895000
Exercise (5)
The following errors were discovered in the books of Waleed
Co. Given that the Difference in the Trial Balance IDs 261000 was
debited to suspense account.
1. The total of purchases book had been under cast by IDs 100000.
2. An amount IDs 76000 paid for repairing Machinery had been
debited to Machinery A/c.
3. Cash IDs 39000 received from Ismail though entered in the cash
book had not been posted to Ismail's A/c.
4. Sales book has been overcast IDs 50000.
5. Goods returned by Suhail IDs 75000 have been entered in the
Returns Outward Book .However; Suhail's A/c is correctly posted.
Required:
Give the journal entries to rectify the following errors. Also
prepare the Suspense Account.
Journal Proper
Date Particulars L.F Debit Credit
IDs IDs
( Being the rectification of purchases book
under cast)
2 Machinery Repairs A/c Dr 76000
To Machinery A/c 76000
(Being the wrong posting now rectified)
To Ismail's A/c 39000
(Being the completion of double entry for
cash received omitted to be posted to
personal A/c now rectified)
4 Sales A/c Dr 50000
(Being the correction of overcasting of sales
book)
5 Returns Outwards A/c Dr 75000
Returns Inwards A/c Dr 75000
(Being correction of returns inwards
wrongly credited to Returns outwards A/c)
Suspense A/c
Date Particulars L.F Amount Date Particulars L.F Amount
IDs IDs
To Difference in By Purchases A/c 100000
Books A/c 261000 By Sales A/c 50000
To Ismail's A/c 39000 By Returns Outwards A/c 75000
By Returns Inwards A/c 75000
300000 300000
SUMMARY
►The trial balance:- is prepared to check the arithmetical accuracy of accounts. If the trial
balance does not tally, it implies that there are arithmetical errors in the accounts which require
location, detection and rectification thereof. Even if the trial balances tallies, there may still
exist some errors. There are two types of errors:
♦Errors which are not revealed by the trial balance, and
♦Errors which are revealed by the trial balance.
Errors may happen at any of the following stages of the accounting cycle.
At Recording Stage:-
●Errors of omission: a transaction that is not recorded.
●Errors of commission: a transaction that is calculated incorrectly.
●Errors of principle: a transaction that is not in accordance with generally accepted accounting
principles (GAAP).
At Posting Stage:-
►Error of omission
●Complete
●Partial
► Error of commission
●Posting to wrong account
●Posting on the wrong side
●Posting of wrong amount
At Balancing Stage:-
●Wrong totaling
●Wrong balancing
►Preparation of Trial Balance
♦Error of Omission
♦Error of Commission
●Taking wrong amount
●Taking wrong account
●Taking to the wrong side
Errors can be classified into the following four categories on the basis of the nature of
errors and explained here under.
1. Errors of commission
2. Errors of omission
3. Errors of principle
4. Compensating (offsetting) errors
5. Errors of Duplication
►Suspense account:-Is an account when the trial balance is shown different between debit
and credit balance that time the suspense account will use temporarily for equal debit and
credit balance for closing the financial accounts.
Test Questions
1.What is the meaning of accounting errors?
2.Discuss the different types of accounting errors?
3.What is meant by suspense account?
4.Discuss the procedure for rectification of errors?
5. For each question given below there are three answers. Indicate
the correct answer by mentioning (a), (b) or (c)
6-The arithmetical accuracy of Book- Keeping is verified in the:-
(a)Balance Sheet.
(b)Trial Balance.
(c)Cash account.
(d) Ledger accounts
7-Journal proper is used to record:-
(a)Adjustment entries.
(b) Expenses paid in cash.
(c)Sale of goods for cash.
(d) Discovering of errors.
8-An error in a Trial Balance occurs while:-
(a)Preparing the final accounts.
(b)Drawing a trial balance.
(c)Balancing the ledger accounts.
(d)Recording the entries.
9-The Trial Balance helps to discover:-
(a)Error of Omission.
(b)Error of Compensation.
(c) Error of balancing.
(d)Error of duplication.
10-Trial Balance can be prepared only after:-

(a)The preparation of balance sheet.
(b)Journalisation.
(c)Extracting balances from the ledger accounts.
(d)Posting the entries.
11-State whether the following statements are True or False:

(a)A sum of IDs 500000 paid as wages to carpenter for
making furniture should be debited to repairs account.
(b)The expenses on carriage of an old Machine purchased
for factory should be debited to Machine Account.
(c)Compensating errors affect the agreement of the Trial
Balance.
(d)Disagreement of the Trial Balance will affect the
preparation of Final accounts.
12-Match the columns by writing against the serial numbers of

column "A" the appropriate letters from column "B".
No "A" No "B"
(a) Errors of principle 1. One error on one side nullifies an
error on other side.
(b) Errors of commission 2. Failure to record transaction in the
books
(c) Errors of Omission 3. Accounting entries are not made as
per rules of A/cs.
(d) Compensating errors 4. Wrong posting made in ledger.
13-Find out the Mistakes in the following journal entries and
rearrange the wrong entries:-
No Particulars Dr Cr
1 Cash A/c Dr xx
To Rent A/c xx
(Being the rent paid)
2 Cash account Dr xx
To Salman's A/c xx
(Being the cash withdrawn for personal use)
3 Capital A/c Dr xx
To Drawings A/c xx
(Being the cash withdrawn for personal use).
No a b c d
6 x
7 x
8 x
9 x
10 x
11 false false false true
12 3. 2. 4. 1.

CHAPTER
( 10 )
1-DEFINITION OF FINAL ACCOUNTS
2-TRADING ACCOUNT
3-PROFIT AND LOSS ACCOUNT
4-BALANCE SHEET
CHAPTER
( 10 )
‫القوائم المالية‬
Financial statements are the final outputs for applying the

accounting cycle which supply with creditable, relevant, and timely
financial information to take rational economic decision.
The object of a firm is to get profit. It is something of vital
importance to all firms. The profit made by a firm is the difference
between the total revenues earned and the total expenses incurred
during a particular period of time. The owner is also interested to
know their financial position. The preparation of Trading and Profit
and Loss Account and Balance Sheet is known as the preparation of
final accounts. Usually, there is difference between the final
accounts in commercial firms and the final accounts in industrial
companies. This chapter contains the final accounts in commercial
firm.
1- DEFINITION OF FINAL ACCOUNTS
It is the Trial Balance that is the basis for the final accounts.
It contains both debit and credit balances of all ledger accounts .The
debit balance of a Trail balance represent either: Assets or Losses or
Expenses. The credit balances of a Trial balance represent either
Liabilities or Gains.
All Losses and expenses are transferred to the Trading and

Profit and Loss Account.
All assets appear on the Balance Sheet in the assets side.
All Liabilities appear on the Balance Sheet in liabilities

side.
All gains and revenues are transferred to the Trading and
Profit and Loss Account.
The final accounts for commercial firms are split into three
parts:
1-Trading A/c which shows Trading Profit (Gross Profit) or Gross

Loss.
2-Profit and Loss A/c which shows the Net Profit or Loss incurred.
3-Balance Sheet which is a statement of Assets and Liabilities. This

statement reflects the financial position of the business.
2-TRADING ACCOUNT ‫حساب المتاجرة‬
This account is a nominal account. It shows the results of buying

and selling of goods. It shows how much gross profit the business has
earned. The difference between sales and cost of goods sold is gross profit.
The purpose of preparing the trading account is to find gross profit or
gross loss.
Cost of goods sold = Opening Stock + Purchases + Direct

Expenses on purchases - Closing Stock
Example:
Calculate purchases from the following information:

Opening Stock IDs 5000
Closing Stock IDs 7000
Cost of Goods sold IDs 80000
Solution:
Opening Stock + Purchases - Closing stock = Cost of goods sold
5000 + Purchases - 7000 = 80000
Purchases = 80000 - 5000 + 7000
Purchases = IDs 82000
Format of Trading Account
Trading A/c
Particulars IDs Amount Particulars IDs Amount
IDs IDs
To Opening Stock ××× By Sales ×××
To Purchases ××× By Purchases Returns ×××
To Sales Returns ××× By Closing Stock ×××
To Freight-in ×××
By P. & L. A/c ×××
To P. & L. A/c ××× [Gross Loss c/d
[Gross Profit c/d (If there is a loss)]
(if there is a profit)]
××× ×××
The balance of this account shows gross profit or gross loss
which is transferred to Profit and Loss Account. The entries in
journal book are recording as follow:
Closing entries for Trading Account:
Explanation Entry Dr Cr
(1) For Transfer of Trading account Dr ×××
Opening Stock, To beginning inventory ×××
purchases, Sales returns To purchases ×××
and direct expenses to To freight in ×××
Trading A/c: To sales returns ×××
(2) For Transfer of Sales revenues Dr ×××
Sales revenues ,and Purchases returns Dr ×××
Purchases returns to To Trading account ×××
Trading A/c
(3 )For Transfer Ending Inventory Dr ×××

Closing Stock to To Trading account ×××
Trading A/c
If a total credit for trading account is more than total debits
gross profit realized the closing entry is:
For Trading A/c Dr ×××
transferring To profit and loss A/c ×××
gross profit to (Close the gross profit)
P&L A/c
If total credits for trading account is less than total debits

gross loss incurred and closing entry is:
For transferring Profit and Loss A/c Dr ×××
gross Loss to To trading A/c ×××
P&L A/c
Some of authors show to subtract (deduct) sales returns and

allowances from sales revenue to get net sales; deduct purchases
returns and allowances from purchases to find net purchases.
Cost of purchases — net purchases + other costs of purchases.

3-PROFIT AND LOSS ACCOUNT ‫حساب األرباح والخسائر‬
The purpose of this account is to compute net profit or net
loss. The Steps for preparing profit and loss account are the
following:
1-Close the result of gross profit or gross loss.
2-Close all expenses by crediting the expenses accounts and debit
profit and loss account.
3-Close other revenues and gains by debiting these accounts and
crediting profit and loss account.
If there is a net profit the closing entry is:
Date Entry Dr Cr
profit and loss A/c Dr ×××
To owner's capital A/c ×××
If there is a net profit the closing entry is:
Date Entry Dr Cr
The owner's capital A/c Dr ×××
To profit and loss A/c ×××
The Form of Profit and Loss Account
Particulars Amount Particulars Amount
To Salaries (office) ×× By Gross profit(Transferred
To Rent and Rates (office) ×× from Trading A/c) ××
To Stationery ×× By Interest received ××
To Lighting (office) ×× By Commission received ××
To Insurance ×× By Apprenticeship premium ××
To Depreciation ×× By Discount (Cr)* ××
To Repairs ×× By Profit on sale of ××
To Postage ×× investments
To Bank Charges ×× By Old R.B.D xx
To Interest ×× Less Bad debt xx
To Audit Fees ×× Less New R.B.D xx ××
To Advertising ××
To Discount (Dr.)* ××
To Allowances ××
To Carriage Outwards ××
To Loss on sale of assets ××
To Loss by Fire ××
To Bad debts + New R.B.D xx ××
Less Old R.B.D xx ××
To Capital A/c (Net profit
Transferred to Capital A/c) ××
××× ×××
*Some of authors record the discounts of sales and

purchases in profit and loss account instead of Trading account,
because they consider this accounts not related directly with trading
transactions , but its depend on selling policy of the firm. This
treatment of the discounts in Trading account not mean an
accounting error.
 Difference between Trading and Profit and Loss Account
Trading Account Profit and Loss Account
1. Trading Account is the first 1. Profit and loss account is the

account of the final accounts second account of final accounts.
2. The object of Trading account is 2. The object of profit and loss
to ascertain gross profit or gross account is to ascertain net profit or
loss by comparing the cost price net loss by taking into
with the selling price of the goods. consideration all revenues and
losses or expenses.
3. Trading account contains direct 3. Profit and losses account
expenses on purchases. contains indirect expenses and
revenues.
4. Non - trading organizations do 4. Non - trading organizations
not prepare this account. prepare an equivalent of this
account called incomes and
expenditure account.
4-BALANCE SHEET ‫الميزانية‬
The rest balances in trial balance after nominal accounts are

closed represent balance sheet accounts: assets, liabilities, and
owner's equity. If the accountant wants to close the accounting
books at the end of the year we debit liabilities accounts and
owner's equity and credit assets' accounts.
A Balance Sheet is a simple statement drawn up at the end of
each trading period. It gives us information about:
(1)The nature and value of assets.
(2)The nature and extent of liabilities.
(3)The firm is solvent.
(4)The firm sound.
The Balance Sheet presents a snapshot of the investing and

financing activities of a firm as of a moment in time. It presents a
listing of a firm's assets, liabilities and shareholder's equity.
A Balance Sheet has two sides:
The right hand side is Liabilities side.

The left hand side is Assets side.
The following is the format of a Balance Sheet as on 31st
December, 2010
Name of Company…….
Balance Sheet
as on 31st December, 2010
Assets IDs IDs Liabilities IDs IDs
Current Assets Current Liabilities
…………….. …………………
……………. …………………
Fixed Assets Owner's Equity
…………… ...........................
……………. …………………
The items of the assets are mostly arranged in the order of
realizability which is given below:
Order of Realizability :
1. Cash - in hand
2. Cash at Bank
3. Investments
4. Bills Receivable
5. Sundry Debtors
6. Closing Stock
7. Prepaid Expenses
8. Fixed Assets etc.
Liabilities are arranged usually in the order of urgency of

payment which is given below:
Order of Urgency of Payment

1. Outstanding Creditors
2. Sundry Creditors
3. Bills Payable
4. Loan
5. Income received in advance
6. Reserves
7. Capital
A Balance Sheet may be presented in the following classified
form:
BALANCE SHEET
As on ,……….
Assets IDs IDs Liabilities IDs IDs
Cash in office ×× Outstanding creditors ××
Cash at Bank ×× Sundry Creditors ××
Investments ×× Bills Payable ××
Bills Receivable ×× Loan ××
Sundry Debtors ×× Income received in advance ××
Less Reserve for bad )××) Reserves ××
debts (New Reserve) ×× Capital ××
Closing Stock ×× Add Net Profit ××
Prepaid Expenses ×× Add Additional Capital ××
Land and Building ×× Add Interest on capital ××
Plant and Machinery ×× Less Drawings )××)
Furniture and Fixtures ×× Less Interest on Drawings )××)
Less Net Loss )××)
××× ×××
Preparation of Balance Sheet as Per American System:
FOURAT Corporation
Balance Sheet as December 31, 2010

Amounts
ASSETS IDs
Current Assets:
Cash ×××
Sundry Debtors ×××
Closing inventory ×××
Prepaid Expenses ×××
Property, Plant and Equipment:
Property ×××
Plant ×××
Equipment ×××
Total assets ××××
LIABILITIES AND SHAREHOLDER'S EQUITY:
Current liabilities :
Sundry Creditors ×××
Advance from Customers ×××
Shareholders' Equity ×××
Common stock ×××
Total liabilities and Shareholder's Equity ××××
Exercise (1)
The following is a trial balance for Salah-Aldine Company Dec, 31,
2010(Amounts in thousands):
Names of accounts Debit Credit

IDs IDs
Beginning inventory 2000
Purchases 6000
Sales 14000
Freight- in 2000
Sales returns 3000
Rent expense 1000
Salaries expense 2000
Purchase discount 1000
Purchase returns 1000
Gains on sale of fixed assets 500
Creditors (accounts payable) 2000
Freight- out 2000
Advertising expenses 1000
Sales discount 500
Furniture 1000
Debtors (accounts receivables) 4000
Cash 5000
Drawings 2000
Cars 6000
Notes receivable 2500
Notes payable 1500
Capital ????
Totals 40000 40000
Ending inventory at cost IDs 4000, at market IDs 5000.
Required:
1-Prepare trading account, profit and loss account for the year ended Dec, 31, 2010.
2. Prepare balance sheet as of Dec, 31, 2010.
3. Record the closing entries at Dec, 31, 2010.
Solution:
Capital balance = 40000 - 20000 = ID 20000

Salah-Aldine Company
Trading Account
For the year ended Dec, 31, 2010
Date Particular IDs Date Particular IDs

To Beginning inventory 2000 By ending Inventory 4000
To purchases 6000 By sales 14000
To freight in 2000 By purchase return 1000
To sales returns 3000
To profit and loss A/c 6000
(Gross profit)
19000 19000
Profit and loss account
For the year ended Dec, 31, 2010
Date Particular IDs Date Particular IDs

To rent expense 1000 By trading A/c 6000
To salaries expense 2000 By purchases discount 1000
To freight out 2000 By gains from selling fixed assets 500
To advertising expenses 1000
To sales discount 500
To capital A/c (Net Profit) 1000
7500 7500
Balance sheet as of Dec., 31, 2010
Assets Liabilities & owner's
IDs IDs equity IDs IDs
Current assets Current liabilities
Cash 5000 Notes payable 1500
Notes receivable 2500 creditors (accounts 2000
payable)
Debtors (accounts 4000 Total current liabilities 3500
receivables)
Ending inventory 4000 Owner's equity
Total current assets 15500 Capital 1/1 20000
Fixed assets + Net income 1000
Furniture 1000 21000
Cars 6000
Less: drawings (2000)
Total fixed assets 7000 Net owner's equity 19000
Total assets 22500 Total liabilities and 22500
owner's equity
Closing entries
Date Entries IDs IDs

Trading account Dr 13000
To beginning inventory 2000
To purchases 6000
To freight in 2000
To sales returns 3000
Sales revenue Dr 14000
Purchases returns Dr 1000
To trading A/c 15000
Ending inventory A/c Dr 4000
To Trading A/c 4000
Trading A/c Dr 6000
To profit and loss account 6000
Profit and loss A/c Dr 6500
To rent expense 1000
To salaries expense 2000
To freight out 2000
To advertising expense 1000
To sales discount 500
Purchases discount A/c Dr 1000
Gains from selling fixed assets A/c Dr 500
To profit and loss A/c 1500
To close expenses accounts, it may be credit these accounts

since its normal balance is debit, and vice versa to revenues.
Exercise (2)
The following is a debt and credit balances extracted from the books of Jamal
Traders on 31 December 2010 (Amounts in IDs).
Debt balances
Stock (1-1-2010) 4680000 , sales returns 860000 , Purchases 24310000 carriage and
freight 1860000, Rent and taxes 570000, Salaries and wages 930000,Sundry Debtors
2400000, Bank Interest 90000, Printing and Advertising 1460000 cash at banks
820000, Financial investments 500000, furniture and Fittings 180000, Discount
payable734000, general expenses 361000, audit fees 50000, insurance 80000,
Travelling Expenses 213000 , Postage and Telegrams 87000, Cash in hand 38000,
Equipment 3000000, drawings 1000000 (Total 44223000 IDs)
Credit Balances
Received Discount 369000, Revenue from Investments 25000, loan 2000000, sundry
creditors 1480000, purchases returns 580000, Sales 28960000, capital 10809000
(Total 44223000 IDs).
On December 31, 2010 the stock on hand was valued at cost 7860000 IDs.
Required:
1. Prepare the trading Account for the year ended 31-12-2010.

2. Prepare the Profit and Loss Account for the year ended 31/12/2010
3. Prepare the Balance Sheet as on 31/Ì2/2010.
Trading A/c
Particulars IDs Particulars IDs
To Opening Stock 4680000 By Sales 28960000
To Purchases 24310000 By Purchases Returns 580000
To Sales Returns 860000 By Closing Stock 78600000
To Carriage and Freight 1860000
To P & L A/c(Gross Profit) 5690000
Total 37400000 Total 37400000
Profit & Loss A/c

Particulars IDs Particulars IDs
To Salaries and Wages 930000 By Trading A/c Gross Profit) 5690000
To Rent and Taxes 570000 By Discount Received 369000
To Printing and Advertising 87000 By Revenues from investments 25000
To Discount on Sales 734000
To General Exp. 361000
To Travelling Exp. 213000
To Postage and Telegrams 1460000
To Insurance 80000
To Audit Fees 50000
To Bank Interest 90000
To Capital(Net Profit) 1509000
Total 6084000 Total 6084000

Balance Sheet
Assets IDs Liabilities IDs
Cash in Hand 38000 Sundry Creditors 1480000
Cash at Bank 820000 Bank Loan 2000000
Financial Investments 500000
Sundry Debtors 2400000
Closing Stock 7860000 Capital 10809000
Furniture and Fitting 180000 + Net Profit 1509000
Equipment 3000000 (-) Drawings (1000000) 11318000
Total 14798000 Total 14798000

SUMMARY
Final accounts consist of trading A/c P&L A/c and
balance sheet. All the amounts from trial balance are taken to
prepare these accounts.
In Trading A/c all the transactions which are related to

a firm are recorded such as sales purchases wages etc. the
profit in this a/c is known as gross profit and it is carried
forwarded to P&L A/c.
In P&L A/c all the transactions which are related to

administration or office are recorded. Such as office expenses
salaries interest on investments. The profit in this a/c after
balancing is known as net profit which is added to the capital
in the balance sheet. If there's loss it’s known as net loss and it
is deducted from the capital.
In balance sheet there are assets & liabilities assets

include buildings investments debtors etc. Liabilities include
loan creditor’s bills payable etc. P&L A/c shows whether a
firm has earned profit or not where as balance sheet shows us
the overall position of the firm.
Test Questions
1- Complete the following Sentences by choosing the correct

alternative:
(1)Preparation of final accounts consists of:-

(a) Revenue accounts alone (b) Balance Sheet only (c) Revenues
and expenses accounts and Balance Sheet.
(2)Outstanding expenses are:
(a) Nominal accounts (b) Properties (c) Personal accounts
(3)Balance sheet is containing the balances of:-
(a)Real and Personal accounts (b) Real and Nominal accounts (c)
Nominal and Personal accounts.
(4)Prepaid insurance appears in:-
(a)Trading account (b) Profit and Loss account (c) accounts of
asset.
(5)Depreciation is a:-
(a)Gain (b) Loss (c) Appreciation
(6)Income earned but not received is:-
(a)A liability (b) an asset (c) Nominal account
(7)Interest on Drawings is deducted from:-
(a)Net profit (b) Drawings (c) Capital
(8)Closing Stock is valued at:-
(a)Cost price (b) Market price (c) Cost price or market price
whichever is lower.
2- Choose the correct answer from the following:-
(1)Gross loss will result if:
a- Sales revenues are greater than cost of goods sold.
b- Operating expenses are greater than net income.
c- Sales revenues are less than cost of gods sold.
d- Sales revenues are less than operating expense.
(2)A credit sale of IDs 1080 is made on July 10, terms 5/10, net /
30, on which a return of IDs 80 is granted on July 15. The amount
received as a payment in full one 19 July is:
(a) 1000 (b) 1080 (c) 1039.75 (d) 950
(3) In determining cost of goods sold:
Purchase returns and allowances Freight – in

a Deducted Deducted
b Added Added
c Deducted Added
d Added Deducted
(4) If beginning inventory is IDs 10000, cost of purchases is IDs

190000, and ending inventory is IDs 30000, cost of goods sold is:
(a) 170000 (b) 230000 (c) 220000 (d) 200000
(5)If sales revenues are IDs 500000, cost of goods sold( x).
Operating expenses 50000, income from operation 150000. The
value of x is:
a- 200000 b- 300000 c- 400000 d- 500000
(6)The closing entry for ending merchandise inventory in financial
accounts:
No. Trading accounts Balance sheet

a Debit Debit
b Debit Credit
c Credit Credit
d Credit Debit
(7)The beginning balance in accounts receivable is IDs 80000, and

the ending balance is 75000. Sales during the period are IDs
120000. Cash receipts from customers are:
a-125000 b- 115000 c- 120000 d-non of all the above.
(8)The sheet that includes assets, liabilities, and owner's equity is:
a-Trial balance
b- Balance sheet
c- Income statement
d- Profit and loss account
(9) Interest expense account is closed in:
a- Trading A/c.
b- Balance sheet,
c- Profit and loss account,
d- Manufacturing account.
(10)All of the following are assets except:

a- Notes receivable.
b- Marketable securities in other corporations.
c- Interest revenue.
d- Prepaid insurance.
3-Match the following:-

No. "A" No. "B"
1 Trading A/c a Group of three different A/cs .
2 Profit & Loss A/c b Deducted from Sales.
3 Balance Sheet c Deducted from Purchases.
4 Financial statements d Not an account, but a statement.
5 Purchase Returns e Indicates gross profit or loss.
6 Sales Returns f Indicates net profit or loss.
4-Match the following:-
No. A No. B
1 Outstanding Expenses a Investment made into the business by proprietor
2 Accounts receivable b Is a liability of the business
3 Depreciation c Is an asset of the business
4 Prepaid expenses d Deducted from asset concerned
5 Drawings e Shown on the asset side of Balance Sheet
6 Capital f Deducted from capital
5-State whether the statements given below are True or False
1) Capital is a asset account.

2) Balance sheet consists of debit side and credit side.
3) All Assets will show debit balances.
4) All Liabilities will show credit balances.
5) An account with debit balance will be either expense or asset.
6) Closing stock is valued at cost price or market price
whichever is lesser.
6-State whether the following statements are True or False:
(1)Financial statements are the group of two statements :( a) trading

A/c and ( b) profit and Loss a/c.
(2)Trading A/c gives result of gross profit earned or gross loss
suffered in the trading year.
(3)Trading A/c is prepared on the basis of indirect expenses and
incomes.
(4)Debit balance of trading A/c indicates gross loss.
(5)Credit balance of trading A/c shows gross profit.
(6)Profit and Loss A/c is prepared on the basis of direct expenses
and incomes.
(7)Debit balance of P.L A/c shows net profit.
(8)Credit balance of P/L A/c indicates net profit.
(9)Balance sheet is a statement and not an account.
(10)If Trial Balance is not tallied, balance sheet prepared on it, will
not be balanced.
7-The following information about the first half of 2010 for
Quick meal restaurant:

Purchases 10000
Sales 25000
Purchases returns 1000
Sales returns 6000
Beginning inventory 6000
Ending inventory 4000
Freight – in 2000
Selling expenses 3000
Administrative expenses 500
Required:
A: Determine the following:
1- The cost of goods purchased.
2-The cost of goods sold.
3-Gross profit.
4-Net income.
B: Prepare trading account for quick meal for the half ended June 30,2010.
C: Record the closing entries.
8-The following balances are showed at Dec. 31, 2010 for Ali's
company:
Merchandise inventory 1/1 15000
Sales 101000
Sales returns 1000
Accounts receivables 7000
Purchases 60000
Freight - in 2000
Fright - out 4000
Cash 21000
Equipments 20000
Administrative expenses 7000
Notes receivables 12000
Accounts payable 5000
Notes payable 1000
Capital ????
Ending inventory at cost 20000
Ending inventory at market 18000
Required:
1 - Prepare the trial balance at the end of 2010.
2-Prepare income statement for the year ended Dec, 31, 2010
3-Prepare trading A/c, profit and loss account.
4-Prepare the balance sheet as of Dec. 31, 2010.
5-Write the closing entries.
No. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1 c a a c b b c c --- ---
2 c d c a b a a b c c
3 e f d a c b --- --- --- ---
4 c e d b f a --- --- --- ---
5 F F T T T T --- --- --- ---
6 F T F F F F T F T T

CHAPTER
(11)
COMMERCIAL
CORRESPONDENCES
1-BUSINESS LETTERS:
2- CHARACRTRASTICS OF EFFECTIVE
BUSINESS LETTERS
3- PARTS OF BUSINESS LETTERS
CHAPTER
(11)
COMMERCIAL
CORRESPONDENCES
‫المراسالت التجارية‬
Communication through exchange of letters is known as

correspondence. We communicate our feelings, thoughts etc. to our
friends and relatives through letters that may be called personal
correspondence. A Businessman also writes and receives letters in
his day to-day transactions, which may be called business
correspondence.
Commercial correspondence or business letter is a written
communication between two parties. Businessmen may write letters
to supplier of goods and also receive letters from the suppliers.
Customers may write letters to businessmen seeking information
about availability of goods, price, quality, sample etc. or place order
for purchase of goods. Thus, business letters may be defined as a
media or means through which views are expressed and ideas or
information is communicated in writing in the process of business
activities.
1-BUSINESS LETTERS:
The whole secret behind good business letter-writing is to
write simply, in an easy and natural way, which makes the letter
sounds as much as possible like good conservation.
(1)Definition of a Business Letter
A business letter is defined as "a message that attempts(‫(تحاول‬

to influence its reader to take some actions or Attitudes desired by
the sender".
In other words the correspondent tries to get his reader to
agree with him, this attempt at agreement should always be part of
the letter, whether the desired result is of an immediate importance,
such as collecting of a bill, or it is an intangible attitude like
goodwill.
(2) Kinds of Correspondences ‫أنواع المراسالت‬
There are three kinds of correspondence as shown are

designed in following Figure :
Figure (6)
Kinds of Correspondences
Correspondences
Private (Personal) Official Business

Correspondences
Correspondences Correspondences
Personal or Official Commercial

Social Matters
Matters Matters
A-Private (personal) correspondences ‫المراسالت الخاصة‬
They are defined as letters exchanged among friends,

relatives, and acquaintances for personal or social matters.
B-Official correspondences ‫المراسالت الرسمية‬
They are defined as letters exchanged among governmental

institutions, offices or agencies -at the national or local levels -
concerning official matters.
C-Business Correspondences ‫مراسالت األعمال‬
They are defined as letters exchanged among business firms

or businessmen- Sellers and Buyers or they are exposed to carry out
commercial transactions.
(3) Functions of Business Letters ‫وظائف رسائل االعمال‬

Business letters have three general functions:
a- They provide (give) information to the reader.
b- They obtain (get) information from the reader.
c- They build goodwill for the sender.
Goodwill is defined as" the disposition of customers to
return to the place where they have been treated well", also it can be
defined as "a feeling of confidence in a firm that makes a customer
trades with rather than with another".
2- CHARACRTRASTICS OF EFFECTIVE
BUSINESS LETTERS ‫خصائص الرسائل التجارية‬
An effective business letter is defined as "the writing that
produces the desired results". To have an effective letter, it should
have the following two Characteristics: Characteristics of the tone,
and Characteristics of the structure, as shown in Figure (7) below.
Figure (7)
Characteristics of Effective Business Letters
Those related to the Those related to the

Tone structure
1-the reader’s interest

1-clarity
2-courttesy & consideration

2-conciseness
3- Personalization
3-good organization
4- Naturalness & sincerity
5- Proper tone
(1) Qualities of Effective Business Letters
An effective business letter is defined as “writing that

produces the desired results". To be an effective letter, your letter
should have the following qualities, which are classified into two
groups: - Qualities of the tone and Qualities of the structure".
A- Qualities of the tone ‫خصائص النبرة‬
Tone consists of wording (‫ )صياغة‬the letter to produce a

favorable action from the reader. A letter that has the right tone
receives greater attention than one with improper (‫ )غير الئق‬tone. So
the right tone creates goodwill for the firm. Qualities of, the tone
include the following: -
1- The reader's interests ‫فوائد القراء‬
This quality means that the letter should be adopt with the
reader's viewpoint, not for one part, by trying to understand his
needs, wishes, interests, problems, and the best way of meeting
them, in other words your letter should be a reader-oriented, so that
it shows an awareness (‫ادراك‬،‫ )معرفة‬of the reader's aims while at the
same time attains (‫ )بلوغ‬your aims too.
378
2- Courtesy and consideration ‫المجاملة واالعتبار‬
Courtesy means consideration for others and expressing good

feelings through exercising Language techniques. It also means
using polite and diplomatic expressions.
Example: - Please accept my apologies for not answering your letter
sooner.
3- Personalization ‫الشخصنة‬
The letters should be reflect the best behavior, they should be

natural, unaffected (‫)غير متأثرة‬, and direct. In writing the letter it is
preferred to use the pronouns "I" and "We”. The use of these
pronouns helps to establish better rapport with reader and gives
personal touching with your writing.
Example:-
Personal: 1 (we) hope to hear soon from you soon.
Impersonal: Hoping to hear from you .
4- Naturalness and sincerity ‫الصدق واإلخالص‬
When you sit down to write or dictate a letter try to feel a

genuine interest in the person you are writing to, as well as in his
problems..
Generally, the language of conversation is the best language
for effective letters. This language should not distract your reader
but encourages him to concentrate on what you have to say.
379
Examples:
Instead of writing: I has pleasure informing you.
You must be writing: I'm pleased to tell you (or, to say).
5- Proper Tone ‫النبرة الخاصة‬
If a letter is to achieve its purpose, then its tone must be right

.Before beginning to write think carefully about the way in which
you want to influence your reader. Ask yourself, "What do I want
this letter to do?" and then express yourself accordingly, being
persuasive, apologetic, obliging, firm and soon, depending on the
effect you want to produce.
Example:-
Negative tone: We cannot ship your order because you did not send
the payment.
Positive tone: -We shall be glad to ship your order as soon as we
receive your cheque.
B-Qualities of the Structure ‫خواص الهيكل‬
The structure of the letter concerns the content of the

message and its organization. So a good letter is that having a text
organized in a logical, coherent, and forceful manner so that it leads
to the composition of a compact message. Qualities of the structure
include the following:-
380
1-Clarity ‫الوضوح‬
Clarity means the transfer of the writer's thoughts to a reader

without misunderstanding; it is the most important factor in written
communications. In order to have such a quality, a letter must be
understandable without requiring several readings.
Clarity can be attained by using the following points:-
a- Use simple, plain, and familiar words, and prefer short words to
long if they will do just as well. Wherever possible, prefer single
word to the elaborate phrase. Business letter - writing calls for a
plain style - a style that is simple, clear and easily understood.
b- Be consistent: avoid repeating in the same sentence an important
word with different meanings.
c- Be precise: use expressions with precise meanings, when
acknowledging a letter; refer to it by date, subject, and reference
number (if any).
d- Make your sentences reasonable short, a long sentence usually
can be divided into several smaller ones.
e- Punctuate the letter content correctly; punctuation marks are
helpful to break up long sentences to be easily understood.
f- Use active voice (‫ )صيغة المعلوم‬instead of passive voice ( ‫صيغة‬
‫ )المجهول‬to show your interest in people and to be more direct in
expressing your thoughts (‫)افكار‬.
g- Tabulate your data because this will help your reader focusing
his attention on them as they will be very clear when numbered or
listed on separate lines.
381
2- Conciseness ‫االختصار‬،‫االيجاز‬
Conciseness is saying everything you have to say in the

fewest possible words. This means being brief but complete. In
other words, conciseness means condensing (‫ )تلخيص‬the content of
your letter in as few words as possible, meanwhile expressing your
ideas fully and completely.
Example: -
Instead of Say: in the course of the next few days. Say: during the
next few days.
3-Good organization ‫التنظيم الجيد‬
To achieve good organization in your letter, follow these

points:-
a- Plan your letter. This includes:-
1-Writing down all the points you want to cover.

2-Arranging these points in a logical order.
3-Relating together all the paragraphs of your message so that one
idea leads to another.
b- Paragraph your letter. Most letters have three

paragraphs: -
382
1- The first takes the form of an introduction or acknowledgement
if there has been a previous correspondence.
2-The second gives information and states facts (‫ وقائع‬،‫)حقائق‬.
3-The third refers to future actions.
c- Attaining the desired result

This means that:-
1-The letter should start with the good news and ideas which
interest the reader.
2-Followed by ideas which need some explanations or reasoning.
3-Closing with an incentive (‫ حافز‬،‫ )دافع‬to action.
4-In the case of bad-news letter, start in a pleasant way, giving the
justifying reasons first, and then disclosing the bad news tactfully
(‫)بلباقة‬.
4-The Written Word in Business
The letter is one of the most effective ways of conveying
information from one person to another. Bearing in mind the
important role played by the letter in the world of business, people
in general and students in specific need to:
1- Distinguish between good and bad practices in letter writing.
2- Know the acceptable forms and styles for commercial letters.
3- Be particularly careful and precise when we compose letters.
There are some guide lines for letter writing:
1-Empathy ‫المشاركة الوجدانية‬
2- Reply to letter as promptly as possible.
3-Keep the language as simple as possible.
4- Check the letter carefully before it is signed and addressed to the
recipient.
5-Avoid irrelevancy (‫ )الخروج عن صلب الموضوع‬and triviality (‫)التفاهة‬.
383
6-Avoid making promises you cannot keep or be careful.
7-Avoid attacking other people or firms particularly by name.
8- Deal with all the point raised in an incoming letter.
3-THE PARTS OF BUSINESS LETTERS

The business letter contains two kinds of parts: The main
parts of a business letter and the main and auxiliary parts of the
letter.
1-The main parts of a business letter ‫االجزاء الرئيسية للرسالة‬

Usually a business letter consists of seven main parts: The
heading, the date, the inside address, the salutation, the body, the
complimentary close, and the signature. The following Figure
shows these seven parts.
Figure (8)
Heading
…………….
………………
b- Date………..
c-Inside Address
……………………
d- Salutation
……………………
e- Body
…………………………………………………………………………………
………………………………………………………………………………….
384
f- Complimentary Close
g- Signature
A-Heading ‫عنوان المرسل‬
This part contains the name, address, street, code number of

the addresser firm (sender), usually printed at the top of the page
.Headings differ greatly , but they contain at least the name of the
firm, the type of business , the street name or street number, the
district, and the name of the town . To these main items some
additions may be added such as the telephone number, telex, fax, e-
mail, and an attractive trade mark or a picture of the building.
Examples:
(1)Laser Shaving (UK) Ltd Wembley

HAO 1JJ United Kingdom
E-mail: Laser worldwide @ aol. Com
(2)Harper and Grant limited

London w 25
Telephone 01 567 1112
Fax 455689301
385
b- Date ‫التاريخ‬
The date line consists of the day, month, and year, which is
placed two or three spaces below the last line of the heading and
begins at such a point from the center of the page that the figures of
the year end at or near the right hand margin (the upper right - hand
corner of the paper). The date also may be written at the center.
Examples:
(1) March 22nd , 2011
(2) 31st December , 2011
C-Inside letter ‫عنوان المرسل اليه‬
It is the full name and address of the person or organization

you are addressing to. It should be written on the left hand, two
spaces below the date. Names of persons, firms, streets, etc. should
be written as indicated in the source you got the address front.
These details should not be abbreviated.
The following titles are used before the name of the

addressee:
386
(1)Mr. : used before the name of a man.
e.g.: Mr. Salim K. Mahmood.
(2)Mrs. : used before the name of a married woman,

e.g. : Mrs. I. YASSEN
(3)Miss. : used before the name of an unmarried woman,

e.g. : Miss Iman G. SAEED.
(4)Ms. : used before the name of a married or single (Unmarried)

woman.
(5)Messrs: used when addressing more than one person
e.g.: Messrs. Ahmed and partners.
(6)The : used before the name of firms without names of persons.

e.g.: The Central Bank of Iraq.
(7)Dr. or Prof. .: used before the name of a person who has

professional title.
e.g. : Dr. Husein Aljabery
:Prof. Mashkour Alamry.
D-Salutation ‫التحية‬
The salutation it is the greeting with which the business letter

begins, and usually typed at the left margin, a double space under
the last line of the inside address.
The choice of salutation depends on the personal relationship
387
between the writer and the reader, and on the form of the inside
address as well.
The most commonly used salutation for a letter addressed to
a company is "Gentlemen" or "Dear Sirs". For a letter addressed to
a person, use the form of salutation that best reflects the degree of
formality or informality you consider appropriate under the
circumstances.
The list below shows the different salutations used (arranged

form the most to the least formal):
(1)Dear sir(s): used in a letter written to a man (men) whose name
you do not know.
e.g.: Dear sir,: Dear sirs,
(2)Dear Madam: used in a letter written to a woman, whether
single or married, whose name you do not know,
e.g., : Dear Madam,
(3)Dear (give title and surname): used in a letter written to a man or
woman whose name you know.
Dear Mr. AL-GANIM,
Dear Mrs. .AL- KHTEEB,
(4)My dear (give title and name): used in a letter written to a man
/or woman whom you have a personal relationship.
My dear Zaky, comma after the salutation is optional, but it is
preferable to be used.
E-Body of letter ‫جسم الرسالة‬
It contains the message we want to convey to the reader; and

is arranged in paragraphs each one deals one point of the message,
388
just as in a composition. Where each separate idea is expressed in a
separate paragraph. Short paragraphs are more easily read and
quickly understood than long ones. The body begins two spaces
below the salutation is generally single spaced (leave a double
space the paragraphs). The text of the message depends on the
subject about which the letter is written.
Some letters are very short and many consist of only one
paragraph. Many others fall naturally into the framework of the
following three - paragraphs plan-:
(1)First paragraph (the opening) takes the form of an introduction.
(2)Second paragraph (the middle or main part) gives information
and states the facts.
(3)Third paragraph (the closing part) refers to future action.
F - The Complimentary Close ‫خاتمة الرسالة‬
It is the polite ending which concludes a letter. It is

comparable to the few words of farewell, we say at the end of a
conversation when we part from each other. It is placed two spaces
below the last line of the letter proper except in the case of a very
short letter when more space is left.
Such as "yours truly" or " sincerely yours”, or yours faithfully,
G-Signature ‫التوقيع‬
389
The sender's name should be types below the closing and
may be followed by an official title. The signature must contain the
sender's pen-written name and typewritten name. It may also
include his business title, department, or the name of his company.
2-The auxiliary parts of the letter ‫األجزاء المساعدة للرسالة‬

(a)Reference No ‫رقم الرسالة‬
(b)Attention Line ‫خط االهتمام‬
(c)Subject Line ‫الموضوع‬
(d)Reference Initials ‫الكاتب او الطباع‬
(e)Enclosure Notation ‫المرفقات‬
(f)Carbon Copy Notation ‫نسخ الرسالة‬
(g)Post Script ‫المالحظات‬
(h)Second pages ‫الصفحات التالية‬
Figure (9)
The main and auxiliary parts of the letter
Heading
...............
...............
Date..............
(a)Reference No. .................
Inside Address.....................
(b)Attention Line.....................
Salutation..............................
(c)Subject Line.............................
390
Body
...................................................................................................................
...................................................................................................................
Complimentary Close
Signature
(d)Reference Initials........................
(e)Enclosure Notation......................
(f)Carbon Copy Notation................
(g)Post Script...................................
(h)Second pages...............................
‫كيف تعد رسالتك ؟‬

Before preparing a letter, be sure to determine the exact
purpose. What message is it expected to convey? What response is
desired from the addressee? Then how far does your letter answer
the following questions:
Is the letter………………??????
1- Complete ‫ال تكامل‬
To make sure no omission of any necessary information to
accomplish the letter's purpose.
2- Concise ‫ مختصر‬، ‫موجز‬
You have to express yours ideas in the fewest words
consistent with clarity and courtesy without repetition or a lot of
generalities.
3- Clear ‫الوضوح‬
391
No misunderstanding by the reader to whom the letter is
addressed, this required answer the following questions:
a- Is the language adapted to the vocabulary of the reader to whom
it is addressed?
b- Do the words exactly express the thoughts you desire to convey?
c- Is it paragraphed in separate thought units so that it will be easy
to read?
d-Are thoughts expressed in a coherent and logical order?
4- Correct ‫ التصح يح‬، ‫الضبط‬

a- The data and information and figures are accurate(‫)دقيقة‬
b- Is the letter free from grammatical errors, spelling errors,
and misleading (‫ )تضليل‬punctuation errors?
5- Friendly ‫الترحيب‬
a- Written in a cordinal, friendly tone?
b- Free from antagonistic words, phrases a n d thoughts?
c- Sound sincere?
6-Letter's address ‫عنوان الرسالة‬
There are two styles for addressing an envelope:
1-British style.
2-American style.
British Style American Style
392
Ernest & young Inc. Jonne Willey & sons Inc.
P.O. Box 920 98 south, 2nd Street
London Chicago, 62504
BX3 ZE 5 U.S.A
There are postal indications such as :
a- AIR MAIL
b- Confidential,
c- Registered.
7-The right use of the language ‫االستخدام الصحيح للغة‬
The right use of the language in writing a commercial letter

achieves the following:
(1)It is easy to understand a business letter properly written and

achieve its purpose.
(2)Focusing on important points of the letter since the letter is

written correctly and clearly.
(3)Giving a good impression of the writer and his business.
(4)Avoid the problems of a poorly written letters:-
a-Confusion and misunderstanding.
b-Losing track of the overall argument.
393
It is necessary to know how to use the language properly by
being familiar with:
1- The basic structure of a correct sentence.
2- The rules of proper punctuation.
3- Avoid writing long and complete sentences.
A letter contains a lot of sentences; each sentence is a group
of words which make a complex sense.
8 - Some rules for good writing ‫بعض القواعد للكتابة الجيدة‬
We may summarize the rules of good business letter writing

as follows:
1-Think first of the reader and address yourself to his interests.
2-Adopt a tone suited to the occasion and the purpose of the letter.
3-Write naturally, as you would talk, using plain and familiar
words.
4-Write clearly to the point.
5-Write courteously and make your letter friendly and sincere.
6-Avoid wordiness and Jargon.
7-Write effectively by using simple language, by being consistent
and precise.
394
8-Avoid monotony- introduce variety.
9- Pay special attention to the opening and closing paragraphs.
10- Check your letter.
There are many Steps of opening and sending email:
1- Open any internet browser (Internet explorer, Fire fox, Opera,…..) .
2- Type the following web site address in the address space
(mail.yahoo.com) .
3- Inter your yahoo ID account in the blank against
( xxxxxxx@yahoo.com ) .
4- Inter the password of your account.
5- Press sign in.
6- Press Inbox icon to read your income mail.
7- If you want to write new email and send it, Follow the steps bellow:-
 Press New mail icon.

 Write the email address of the person who you like to send to him the
letter in the space after the "To" word (this email address should
include the symbol @ and the domain " @yahoo.com, @Hotmail .com,
@gmail.com …etc ".
395
 If you want to send this letter to secondary person you can write his
email in the blank after " CC " word which means "carbon copy " .
 If you want to send this letter to another person and you don’t like to let
the others to see the mail address of the recipient, you can write his
email in the blank after " Bcc " word which means "blind carbon copy".
 Write the subject of your letter in the blank after "Subject "
word.
 Write your letter inside the big blank.
 If you like to attach any file or picture you should press on
the attach files icon, load your files by pressing on the
browse icon, after that press attach.
 Wait until the loading process done.
 Press send to send your message.
396
SUMMARY
The business letters are the principal mean used by firms to
keep- in relations with their customers and suppliers, so they are
very important for a businessman to know how to write an effective
business letter.
Different parts of a business letter:-
397
1. Heading
2. Date
3. Reference
4. inside Address
5. Subject
6. Salutation
7. Body of the letter
8. Complimentary close
9. Signature
10. Enclosures
11. Copy Circulation
12. Post Script
The essential parts of a business letter are as follows:

1. Heading -The heading of a business letter usually contains the
name and postal address of the business, E-mail address, Web-site
address, Telephone Number, Fax Number, Trade Mark or logo of
the business (if any).
2. Date - The date is normally written on the right hand side corner
after the heading as the day, month and years. Some examples are
28th Feb., 2011 or Feb. 28, 2011.
3. Reference- It indicates letter number and the department from

where the letter is being sent and the year. It helps in future
reference. This reference number is given on the left hand corner
after the heading. For example, we can write reference number as
AB/FA Dept./2011/27.
4. Inside address - This includes the name and full address of the
person or the firm to whom the letter is to be sent. This is written on
398
the left hand side of the sheet below the reference number. Letters
should be addressed to the responsible head e.g., the Secretary, the
Principal, the Chairman, and the Manager Etc.
Example:
The Chief Manager,
State Bank of Iraqi
Al-Muthana University Campus
Samawah,Al-Muthana- 397007
5. Subject - It is a statement in brief, that indicates the matter to
which the letter relates. It attracts the attention of the receiver
immediately and helps him to know quickly what the letter is about.
For example,
Subject: Your order No. C317/8 dated 12th March 2011.
Subject: Enquiry about Samsung television
Subject: Fire Insurance policy
6. Salutation - This is placed below the inside address. It is usually
followed by a comma (,). Various forms of salutation are:
Sir/Madam: For official and formal correspondence
Dear Sir/Madam: For addressing an individual
Dear Sirs/Dear Madam: For addressing a firm or company.
7. Body of the letter- This comes after salutation. This is the main
part of the letter and it contains the actual message of the sender. It
is divided into three parts.
(a) Opening part - It is the introductory part of the letter. In this
part, attention of the reader should be drawn to the previous
correspondence, if any. For example with reference to your letter
399
no. 326 dated. 12th March 2011, I would like to draw your attention
towards the new brand of television.
(b) Main part - This part usually contains the subject matter of the
letter. It should be precise and written in clear words.
(c) Concluding Part - It contains a statement thereof sender’s
intentions, hopes or expectations concerning the next step to be
taken. Further, the sender should always look forward to getting a
positive response. At the end, terms like Thanking you, with
regards, with warm regards may be used.
8. Complimentary close - It is merely a polite way of ending a
letter. It must be in accordance with the salutation.
For example: Salutation Complementary close
1) Dear Sir/Dear Madam Yours faithfully
2) Dear Mr. Razak Yours sincerely
3) My Dear Akram Yours very sincerely (express very informal
relations.)
9. Signature - It is written in ink, immediately below the

complimentary close. As far as possible, the signature should be
legible. The name of the writer should be typed immediately below
the signature. The designation is given below the typed name.
Where no letterhead is in use, the name of the company too could
be included below the designation of the writer.
400
For example:
Yours faithfully
For M/S Alnoor Electricals
(Signature)
SUNDOS SALIM
Partner
10. Enclosures - This is required when some documents like

cheque, draft, bills, receipts, lists, invoices etc. are attached with the
letter. These enclosures are listed one by one in serial numbers.
For example:
Encl:
1) The list of goods received
2) A cheque for Al-Rasheed Bank . One Million IDs. April. 27,
2011 (Cheque No........) towards payment for goods supplied.
11. Copy circulation - This is required when copies of the letter are
also sent to persons a part of the addressee. It is denoted as C.C.
For example,
1) C.C.The Chairman, Electric Supply Corporation
2) C.C The Director, Electric Supply Corporation
3) C.C The Secretary, Electric Supply Corporation
12. Post script - This is required when the writer wants to add
something, which is not included in the body of the letter. It is
expressed as P.S.
For example, P.S. - In our offer, we provide two years warranty.
401
Test Questions
402
1-Answer the following statements:-
(1) What are the kinds of correspondence letters?

(2) What is the definition of a business letters?
(3) What are the functions of business letter writing?
2-How many parts a business letter is divided into? Name them and
draw a plan on a full sheet of letter paper to show the position of the
main parts of business letter.
3-"To be an effective business letter, your letter should have two

groups of qualities”. Requirement: - Name these qualities, and
define in brief, their elements
4-What are the steps of the goods organization in writing your

letter? When your used E- mail in business correspondences, what
are the necessary steps to achieve this technique? Name the parts of
e-mail business letter?
5-What are the points to achieve good organization in your letter?
6-Choose the right answer from the following options

(a, b, c, d):
403
(1)A personal correspondence is sent to: -
(a) a business firms (b) a governmental institutions (c) a relatives
or friends (d) someone you know well.
(2)The part of the letter that contains the name and address of
sender: -
(a) Inside address (b)Subject Line (c) heading (d) Signature.
(3)Courtesy means: -
(a) Rudeness (b) confidence (c) politeness (d) flattery.
(4)When you write letter by E-Mail (Internet) you should be click:-
(a)New Mail (b) Send (c) address (d) forward.
(5)The suitable title for addressing unmarried woman is: -
(a) Esq. (b) Miss (c) Mrs. (d) Misers.
(6)The most commonly used salutation for a company is: -
(a) Dear sirs (b) Dear Miss (c) Dear Mr. (d) Dear Madam.
7-Write each of the following terms and matches it with the

correct definition.
404
No. The term No The Definition
1 Heading a It is a message that attempts to influence its
reader to take some action or attitude desired by
the sender.
2 Inside address b It indicates the topic of your letter in few
words.
3 Subject line c This is the friendly ending that concludes the
letter.
4 Salutation d It is form used when addressing more than one
person.
5 Messrs e It is the full name and address of the sender
6 Signature f It is the full name and address of the person
receiving the letter.
7 Complementary g It must contain the sender's pen-written name
close and type-written name.
8 Conciseness h It is consists of wording your letter to produce a
favourable action from the reader.
9 Tone i This is the greeting with which the business
letter begins.
10 Business Letter j It is saying everything you have to say in the
fewest possible words.
8-complete each of the following by choosing the right answer

405
from chose in a, b, c or d.
1-Courtesy means:-
( a ) confidence ( b ) rudeness ( c ) politeness ( d ) flattery.
2-An official letter is sent to:-
(a) Relative or friends ( b ) business firm ( c ) a governmental
department ( d ) someone you know well.
3-The subject of a business letter is :-
(A) Private (b) official (c) commercial (d) social.
4- The transfer of the writer's thoughts to reader without
misunderstanding is called:-
( a) confidence (b) courtesy (c) conciseness (d) clarity.
5-A concise letter is that which:-
(a)Takes the reader's feeling into account (b) includes correct
grammar and spelling (c) does not waste words ( d ) is
misunderstood by the reader.
406
9-Choose the right answer from the following options
(a, b, c, or d)
(1) The suitable title for addressing unmarried woman is:-

(a)Esq. (b)Miss. (c)Mess. (d)Mrs.
(2) The subject line serves as:
(a) A reference (b) a matching second sheets (c) a guide filing (d)
a greeting.
(3) An official letter is sent to:
(a) A relative friend (b) a governmental department (c) business
friend (d) someone you know well.
(4) When you want sending a letter by E-mail (Internet), you should
be click
(a) Forward (b) address (c) compose (d) Mail
(5) Courtesy means: -
(a) Flattery (b) politeness (c) rudeness (d) confidence.
407
10-Choose the right answer from those in a, b, c, or d.
(1)The part of the letter that contains the day, the month, and the
year is the:-
(a) Date ( b ) heading ( c ) inside address (d) complimentary close .
(2)The inside address is typed:-
(a ) at the right margin ( b ) at the left margin ( c ) above the
heading ( d ) above the date .
(3)The suitable title for addressing an married woman is: -
(a) Mrs. (b)Messers. (c)Miss. (d) dear Madam.
(4)The subject line serves as :-
( a ) a greeting ( b ) a guide for filing ( c) a matching second sheet
(d) a reference .
(5)An official letter is sent to:-
( a ) business firm ( b ) someone you know well ( c) a governmental
department (d) a relative or friend .
(6)When you write to a person, use with the name his or her:-
(a) Department only (b) Official title (c) Professional title (d)
Position title.
(7)The most commonly used salutation for a company is:-
( a ) Sir ( b ) Dear Mr ( c ) Dear Miss ( d ) Dear Sirs .
(8)When you write and type your letter:-
(a) Use the writer's initials (b) Use the typist's initials (c) Use the
writer's and typist's initials (d) Do not use any initials.
408
11-The following business letter was occurred between two
commercial companies.
Dijlah Aluminum Co.
Al-Sadoon Street 223
Bagdad-IRAQ
6th, Feb, 2011
Ref: ABC/DF
The sale Manager
Arab Aluminium Co.
Amman DX4 62H
Jordan
Dear Sir,
We have read your invitation for tender order No.3. About x 110 raw
material, we are interested in buying a copy after having the necessary
information.
Please send up the price of a copy conditions for tenders and we should
be obliged if you would enclose more detailed information.
Yours faithfully
Ali Ahmed
Purchasing Manager
Required:
(1)Show the main parts of a business letter on the earlier one?
(2)What was the kind of raw material required in the tender?
(3)Did Arab Aluminium Co. Send a letter to buy a copy from this tender?
(4)Write a sentence show that this is an enquiry letter.
(5)Translate the body of this letter to the Arabic Language?
409
12- Answers of some previous questions in chapter(11):
No 1 2 3 4 5 6 7 8 9 10
6 a c c a b a --- --- --- ---
7 e f b i d g c j h a
8 c c c d c --- --- --- --- ---
9 b c b d b --- --- --- --- ---
10 a b d b c c d c --- ---

410
CHAPTER
( 12 )
BUSINESS ACTIVITIES
1-FORMS OF BUSINESS FIRMS
2-COMMERCIAL AND ECONOMIC

ACTIVITIES
3-MARKETING AND DISTRIBUTION

ACTIVITIES
4-SHOPS AND STORES
411
CHAPTER
( 12 )
BUSINESS ACTIVITIES
‫أنشطة األعمال‬
1- FORMS OF BUSINESS FIRMS

‫أشكال منشئات األعمال‬
From Commercial and Legal angles, a business may be
organized in many ways. The common forms of organizing are:
Sole proprietorship, Partnership and Limited company.
An Individual proprietorship ‫المنشاة الفردية‬
The business is carried on by single individual. All the profits
of the business earn go to him. The sole proprietors Liability is
unlimited, i.e. should the business fall into debt, and he is
personally liable for paying of the debts.
A partnership ‫شركة التضامن‬
This firm comprises a minimum of two and a maximum of 20
persons trading together as one firm and sharing in the profits. In
addition to sharing the profits, each partner shares unlimited
412
Liability for all the debts and obligations of the firm and is
responsible for the Liabilities in the firm of his fellow partners as
well as his own.
A limited company ‫الشركة المحدودة‬

Is a Legal entity and is treated by the law like a natural
person; it must be run according to the rules set out by the company
law. Among other provisions, it is laid down that financial
statement must be prepared and audited every year and be made
available for inspection on a public register.
 Corporation ‫شركة مساهمة‬

The Corporation structure consists of the shareholders and
the board of directors. The shareholders a point the board of
directors to manage the company. The capital of a company is
divided into units of ownership called shares .The shares of a public
company are freely transferable from one individual to another.
2- COMMERCIAL AND ECONOMIC

ACTIVITIES
‫األنشطة التجارية واالقتصادية‬
 Business ‫المنشاة‬
Represents the work in buying or selling.
413
 Business Enterprise ‫شركة األعمال‬
Is the system of using the factors of production: Nature,
labour, capital, and entrepreneur to produce goods or services for
selling to achieve profit.
 Equity capital ‫راس المال‬

Is the investment by corporation's stockholder.
 Service Sector ‫قطاع الخدمات‬

Service sector means that portion of the economy whose output
Services, as opposed to goods.
 Business sector ‫قطاع األعمال‬
Consists of public and private sector (Investments, Public or
Government Sector) which achieve the process of production.
Private Sector ‫قطاع خاص‬

Consists of private companies (persons, funds)
 Government sector ‫قطاع حكومي‬

Consists of the governmental offices and institutions which
provide of the services for the citizens.
 Finance Companies ‫شركات التمويل‬

Finance Companies mean financial institutions that
specialized in making Loans.
Business Administration ‫إدارة األعمال‬

414
Is the science of study the organizing of Business enterprises
and utilizing all resources to achieve objectives.
 Company ‫الشركة‬
Is a contract in which two or more persons agreed upon
paying a share from capital to distribute the gain or loss.
Business cycle ‫دورة األعمال‬
Are the variations, the peaks and troughs(‫)اعلى وادنى‬, which
occur in business operations as fluctuations in the level of
production supply, and sale.
 Economics ‫علم االقتصاد‬
Is the study of how people produce, distribute, and consume
the things that satisfy their wants.
Money ‫النقد‬
Money is anything used by a society as a taken of value in
buying and selling goods and services.
 Capital Goods ‫السلع الرأسمالية‬
Are the goods used in process of production and they stay for
long period in the using and not for selling.
415
3-MARKETING AND DISTRIBUTION
ACTIVITIES ‫أنشطة التسويق والتوزيع‬
Marketing ‫التسويق‬
Is the process of planning and executing the conception,
pricing, promotion, and distribution of idea, goods, and services to
create exchanges that satisfy individual and organizational
objectives.
Marketing channel ‫قناة التسويق‬
Marketing channel is a system designed to move goods and
Services from producers to customers, which consists of people and
organizations supported by various facilities, equipment and
information resources.
Marketing Intermediaries ‫وسطاء التسويق‬
They are people or organizations that assist in the flow of
products in a marketing channel.
Agents and brokers ‫الوكالء والسماسرة‬
416
They are intermediaries who assist with the marketing of
goods and services but who don't assume ownership of products,
agents unlike brokers, usually work long term for producers.
 Selling Agents ‫وكالء البيع‬
Agent intermediaries that go beyond manufactures agents by

taking control of promotion, pricing and distribution, they are used
by produces that don't won't to get involved in the marketing of
their own products.
 Distributor ‫الموزع‬
Distributor is a general term usually applied in organizational
markets to intermediaries that perform the equivalent function of
both wholesalers and retailers.
 Wholesalers ‫بائعو الجملة‬
Wholesalers are intermediaries that move goods from
producers to retailers.
 Retailers ‫بائعو التجزئة‬

Retailers are intermediaries that sell to final customers; they
purchase goods from wholesalers, or in some cases directly from
producers.
 Market Price ‫سعر السوق‬

417
Market price is the actual at which a product sells (to
Consumers and organizational customers other than resellers) equal
to list price minus discounts, and allowances.
 Import ‫االستيراد‬
Import is to Purchase goods and raw materials from one
country and bring them into another country.
 Export ‫التصدير‬
Export is to sell goods and raw materials to another country.
 Trading Balance ‫الميزان التجاري‬

Trading Balance is relation between total imports to its total
exports over a one - year period of time.
Trademark ‫العالمة التجارية‬

Trademark is any word, name, symbol or device used by a
manufacturer or merchant to identify his goods and services and to
distinguish them from competitive products. The trademark was
mainly a result of the Industrial Revolution.
Vending machines ‫مكائن البيع‬

Customer is operated machines that distribute products
automatically upon payment.
4-SHOPS AND STORES ‫المحالت والمخازن‬
418
Most people buy goods at shops and stores or at
supermarkets.
Shops
Usually sell one kind of goods services such as shoes, dry
cleaning, meat, or books, and hairdressing, of which they have a
wide range from these goods.
 Store
Is a large shop that sells many different kinds of goods and
possible services? The biggest stores are department stores which
have many departments on several floors. Each department is like a
separate shop and in the biggest department stores, you can buy
almost anything.
Chain stores ‫مخازن السلسلة‬
Chain stores are groups of retail stores owned and operated
by Corporations that perform centralized buying and administered
functions for all the stores.
Supermarket ‫السوق المركزي‬
Supermarkets are stores that sell primarily food items which
selection wide enough to meet most customer's grocery(‫)بقالية‬
shopping needs.
Supermarket ‫السوق المركزي‬
419
Is a kind of retail large shop that has many departments:
food stuffs, grocery, vegetables, and fruits in which buyers practice
self-service.
 Superstores ‫المخازن المركزية‬
Superstores are stores that Combine food and non food items
in long retail locations, Larger than Supermarkets.
 Department Store ‫مخزن القسم‬

Department store is a large general merchandise retailer
selling a wide variety of products of full price with full service.
 Computers ‫الحاسبات‬
Many Companies have now computerised their accounting
procedures because Computers can do the work more quickly and
more accurately than people. The work of the computer does
(storing information finding the right information and doing
calculations) is called data processing.
420
SUMMARY
Business activity is the process of transforming inputs into
outputs by adding value. The type of business may not be the first
question a new or potential business owner contemplates. It is,
however, a question that must be carefully addressed because of the
tax, managerial, legal and liability impacts that the business
formation has. There are a number of legal forms that a business
can take. The most common are:
-Sole Proprietorship
-General Partnership
-Limited Partnership
-Limited Liability Company (LLC)
-Corporation
421
Sole Proprietorships are probably the simplest and cheapest
forms of business organization. They are businesses which have one
owner and they do not have stock. The sole proprietor owns all
assets and is responsible for all debts.
General Partnerships are businesses having two or more owners

who both bear personal responsibility for the operations and
liabilities of the business.
Limited Partnerships can be formed by entrepreneurs to raise

capital. Limited partnerships can consist of general partners with
full liability for the organization and limited partners whose liability
for the organization are limited to a set amount (usually the amount
of their investment).
Limited Liability Company (LLC) is a relatively new form of

business structure. The LLC offers entrepreneurs Limited protection
from the actions of the company as well as from the actions of other
company partners.
Corporations are organized with ownership of shares of stock

which are assignable and transferable. In theory, corporations are
separate legal entities from the owners. They can open bank
accounts, borrow money and operate just as a person in the business
world. Corporations provide limited liability for the owners as well.
This means that the owners cannot be sued for the debts of the
corporation unless they personally guaranteed the debts.
422
Test Questions
1-Define, in not more than 20 words, each of the following
terms:
Computers, Department stores, Import, Market Price, Chain
stores, Superstores, Distributor.
2-Define the following:

-Shops.
-Stores.
-Supermarkets.
-Business cycle.
-Corporation.
- Factors of production.
423
3-State whether the following statements are true or false
(1)Intermediaries who sell to retailer are wholesalers.

(2)Merchants are intermediaries who owner's the goods.
(3)Intermediaries who move goods from producers to customers are
wholesalers.
(4)Brokers are people who assume ownership of products.
(5)Marketing channel is the system which designed to move the
goods from producers to the final customers.
4-Write (T) if statement is True; if the statement false writes

(F):
(1)The size of shops is more than stores.

(2)Business represents buying not selling.
(3)Business sector consist of the public and the private sector.
(4)Capital is from the factors of production.
5- Fill the blanks with the proper terms from the list below:
Storage (a), Storage company (b), store keeper(c), goods in transit

(d), Consumer goods (e).
(1)…………..are goods in everyday use, such as food, clothing,
house hold goods, etc.
(2)Merchandise that is in the course of being carried by rail, air, etc
is called………………
424
(3)Company which keeps items for customers is …………….
(4)Person in charge of a store room is…………………………
(5)Keeping in a store or in a warehouse means…………………..
6- Fill in the blanks with the proper terms from the list below:
Price(a), dividend(b), Partnership(c),proprietorship(d),
unlimited responsibility(e), Shares(f), Stock Exchange(g),
Liability(h), business firms(i),Income (j).
1……………….. Means that the personal assets of the owners of a

firm can be taken when the firm goes bankrupt.
2.The word "Limited" means that the owner of the company have
Limited…… .........................................................................
3.The shares of a public Limited company can be bought and sold
on a……… ..........................................................................
4………………. are individuals who have organized to produce
goods and services in the hope of making a profit.
5.Generally speaking………………. is the amount of money left
from profit after all expenses have been paid.
425
6.A…………….….is a business firm organized and owned by one
person.
7.A……………….is a business firm owned by two or more persons
who share the profit or the Loss.
8.People who own…………… in a company are known as
shareholders.
9.A .............. ……..is payment of a portion of a company's profits to
its shareholders.
10……………… is the amount of money exchanged between
buyer and seller when goods or services are bought or sold.
7- Answers of some previous questions in chapter(12):
No 1 2 3 4 5 6 7 8 9 10
3 T T F F T --- --- --- --- ---
4 F F T T --- --- --- --- --- ---
5 e d b c a --- --- --- --- ---
6 e h g i j d c f b a

426
APPENDIX (1)
NATURE OF ACCOUNTS
Name of the Accounts Meaning Nature of Name of the Accounts Meaning of Nature
of the the the of the
Accounts Accounts Accounts Accounts
Accounts Receivable (A/c) ‫حسابات‬ ‫مدين‬ Light expenses (A/c) ‫مصاريف انارة‬ ‫مدين‬
‫مدينة‬
Accounts Payable (A/c) ‫حسابات دائنة‬ ‫دائن‬ Transportation (A/c) ‫نقل‬ ‫مدين‬
Notes receivable (A/c) ‫اوراق قبض‬ ‫مدين‬ Commission (A/c) ‫عمولة‬ ‫مدين‬
Notes Payable(A/c) ‫اوراق دفع‬ ‫دائن‬ Purchases (A/c) ‫مشتريات‬ ‫مدين‬
Assets(A/c) ‫اصول‬ ‫مدين‬ Returned purchased ‫مردودات‬ ‫دائن‬
(A/c) ‫مشتريات‬
Current Assets(A/c) ‫اصول‬ ‫مدين‬ Sales (A/c) ‫مبيعات‬ ‫دائن‬
‫متداولة‬
Fixed Assets(A/c) ‫اصول ثابتة‬ ‫مدين‬ Returned sales(A/c) ‫مردودات‬ ‫مدين‬
‫مبيعات‬
427
Liabilities (A/c) ‫التزامات‬ ‫دائن‬ Rent income (A/c) ‫دخل االيجار‬ ‫دائن‬
Capital(A/c) ‫راس المال‬ ‫دائن‬ Discount Received (A/c) ‫خصم مكتسب‬ ‫دائن‬
Expenses(A/c) ‫مصاريف‬ ‫مدين‬ Bank (A/c) ‫بنك‬ ‫مدين‬
Revenues(A/c) ‫ايرادات‬ ‫دائن‬ Withdrawals (A/c) ‫مسحوبات‬ ‫مدين‬
Cash(A/c) ‫نقدية‬ ‫مدين‬ Loan(A/c) ‫قرض‬ ‫دائن‬
Merchandise(A/c) ‫بضاعة‬ ‫مدين‬ Earning returned(A/c) ‫ارباح محتجزة‬ ‫دائن‬
Inventory (A/c) ‫مخزون‬ ‫مدين‬ Marketable ‫اسهم قابلة‬ ‫مدين‬
securities(A/c) ‫للتسويق‬
Stock(A/c) ‫مخزون‬ ‫مدين‬ Prepaid expenses (A/c) ‫مصاريف‬ ‫مدين‬
‫مدفوعة مقدما‬
Goods(A/c) ‫بضاعة‬ ‫مدين‬ Depreciation ‫مصروف اندثار‬ ‫مدين‬
expense(A/c)
Buildings (A/c) ‫مباني‬ ‫مدين‬ Accumulated ‫اندثار متراكم‬ ‫دائن‬
depreciation(A/c)
Lands(A/c) ‫اراضي‬ ‫مدين‬ Other assets(A/c) ‫اصول اخرى‬ ‫مدين‬
Equipments(A/c) ‫تجهيزات‬ ‫مدين‬ Accrued expenses ‫مصاريف‬ ‫دائن‬
payable(A/c) ‫مستحقة الدفع‬
Furniture(A/c) ‫اثاث‬ ‫مدين‬ Interest receivable(A/c) ‫فائدة مدينة‬ ‫مدين‬
Discount Allowed(A/c) ‫خصم‬ ‫مدين‬ Interest payable (A/c) ‫فائدة دائنة‬
‫مسموح به‬
Net worth(A/c) ‫صافي ثروة‬ ‫دائن‬ general expenses(A/c) ‫مصاريف عامة‬ ‫مدين‬
Rent (A/c) ‫ايجار‬ ‫مدين‬ administrative ‫مصاريف ادارية‬ ‫مدين‬
expenses(A/c)
Interest (A/c) ‫فائدة‬ ‫دائن‬/‫مدين‬ Freight expenses(A/c) ‫مصاريف شحن‬ ‫مدين‬
Wages (A/c) ‫اجور‬ ‫مدين‬ General revenues(A/c) ‫ايرادات عامة‬ ‫دائن‬
Advertising (A/c) ‫اعالن‬ ‫مدين‬ Exceptional ‫مصاريف‬ ‫مدين‬
expenses(A/c) ‫عرضية‬
Repairs expenses (A/c) ‫مصاريف‬ ‫مدين‬ Exceptional ‫ايرادات عرضية‬ ‫دائن‬
‫تصليح‬ revenues(A/c)
APPENDIX (2)
TERMINOLOGY
‫المصطلحات المحاسبية االنكليزية‬
‫المصطلح االنكليزي‬ ‫المعنى العربي‬
A
Account ‫حساب‬
Accountancy )‫علم المحاسبة (محاسبي‬
Accounting ‫المحاسبة‬
Accountant ‫المحاسب‬
Accounting assumptions ‫االفتراضات المحاسبية‬
Accounting Concepts ‫المفاهيم المحاسبية‬
Accounting constraints ‫المحددات المحاسبية‬
428
Accounting Cycle ‫الدورة المحاسبية‬
Accounting Elements ‫عناصر المحاسبة‬
Accounting Entity ‫الوحدة المحاسبية‬
Accounting Equation ‫المعادلة المحاسبية‬
Accounting Machines ‫االت المحاسبة‬
Accounting Methods ‫طرق المحاسبة‬
Accounting Periods ‫الفترات المحاسبية‬
Accounting Principles ‫مبادئ المحاسبة‬
Accounting Procedures ‫االجراءات المحاسبية‬
Accounting Reports ‫التقارير المحاسبية‬
Accounting Statements ‫القوائم المحاسبية‬
Accounting System ‫النظام المحاسبي‬
Accounting Treatment ‫معالجة محاسبية‬
Accounting theory ‫النظرية المحاسبية‬
Accounts Chart ‫جدول او خريطة الحسابات‬
Account Manual ‫دليل الحسابات‬
Accounts payable )‫ذمم دائنة(الحسابات الدائنة‬
Accounts Receivable )‫ذمم المدينة(الحسابات المدينة‬
Accrual basis ‫اساس االستحقاق‬
Accrued Expenses ‫المصاريف المستحقة‬
Accrued Revenues ‫االيرادات المستحقة‬
Accumulated depreciation ‫االهالك المتراكم‬
Activity ‫نشاط‬
Adjusted trial Balance ‫ميزان المراجعة المعدل‬
Adjusted Entries ‫قيود التسوية‬
Administration cost ‫تكاليف االدارة‬
Allowances ‫المسموحات‬
Allowance for bad Debts ‫مخصص الديون المعدومة‬
Allowance for Doubtful Accounts ‫مخصص الديون المشكوك فيها‬
Amortization ‫االستهالك‬
Analysis of Financial Statements ‫تحليل القوائم المالية‬
Analysis of Financial transactions ‫تحليل العمليات المالية‬
Annual Report ‫التقرير السنوي‬
Assets Accounts ‫حسابات االصول‬
429
Audit ‫تدقيق‬
Authorized Capital ‫راس المال المصرح به‬
B
Bad debts ‫ديون معدومة‬

Balance Sheet ‫ميزانية عمومية‬
Balancing ‫الترصيد‬
Bankruptcy ‫االفالس‬
Beginning inventory ‫مخزون اول المدة‬
Benefits ‫منافع‬
Bill of exchange ‫ورقة سحب‬
Bill Payable book ‫دفتر يومية اوراق الدفع‬
Bill Receivable book ‫دفتر يومية اوراق القبض‬
Bonds ‫سندات طويلة االجل‬
Book - Keeping ‫مسك الدفاتر‬
Book value ‫القيمة الدفترية‬
Branches Accounting ‫محاسبة الفروع‬
Break Even Point ‫تحليل نقطة التعادل‬
Budget ‫موازنة‬
Budget Committee ‫لجنة موازنة‬
Burden (Overhead) ‫اعباء صناعية‬
Business administration ‫ادارة اعمال‬
Capital ‫راس المال‬
Capital Assets (Fixed Assets) )‫موجودات راسمالية(اصول ثابتة‬

Capital Decrease ‫نقص راس المال‬
Capital Expenditures ‫مصاريف راس مالية‬
Capital Gains or Losses ‫ارباح او خسائر راسمالية‬
Capital Increase ‫زيادة راس المال‬
Cash Book ‫سجل نقدية‬
Cash Deficit ‫عجز النقدية‬
Cash Discount ‫خصم نقدي‬
430
Cash flow ‫التدفق النقدي‬
Cheque ‫شيك‬
Classification ‫تصنيف‬
Closed account ‫الحساب المغلق‬
Clients )‫زبائن (عمالء‬
Closing Entries ‫قيود االقفال‬
Closing Stock ‫مخزون اخر المدة‬
Compensating Errors ‫االخطاء المعوضة‬
Compound Entry ‫قيد مركب‬
Commerce ‫تجارة‬
Commission ‫عمولة‬
Company ‫شركة‬
Corporation ‫شركة مساهمة‬
Conservatism ‫التحفظ‬
Consistency ‫التناسق‬،‫الثبات‬
Cost of Good Sold ‫تكلفة البضاعة المباعة‬
Credit Balance ‫رصيد دائن‬
Credit Note ‫اشعار دائن‬
Sales on Credit ‫مبيعات اجلة‬
Creditors ‫الدائنون‬
Current Assets ‫اصول متداولة‬
Current liabilities ‫خصوم متداولة‬
D
Data ‫معلومات‬
Debit balance ‫رصيد مدين‬
Debit note ‫اشعار مدين‬
Deficit ‫عجز‬
Depletion ‫نفاذ‬
Depreciation )‫اهالك(اندثار‬
Disclosure ‫االفصاح‬
Discount ‫الخصم‬
431
Discount allowed ‫خصم مسموح به‬
Disposal of fixed assets ‫االستغناء عن االصول الثابتة‬
Double entry ‫القيد المزدوج‬
Doubtful Debts ‫الديون المشكوك فيها‬
Drawee ‫المسحوب عليه‬
Drawer ‫الساحب‬
Drawings ‫المحسوبات‬
E
Entries ‫قيود‬
Enterprise ‫مشروع تجاري‬
Entry Voucher ‫مستند القيد‬
Equation Accounting ‫المعادلة المحاسبية‬
Equipment Leasing ‫تاجير المعدات‬
Equities ‫الخصوم‬
Errors of commission ‫اخطاء ارتكابية‬
Errors of duplication ‫اخطاء مكررة‬
Errors of omission )‫اخطاء الحذف(السهو‬
Errors of principle ‫اخطاء فنية‬
Estimated Statements ‫البيانات التقديرية‬
Expenses ‫مصاريف‬
F
Final Account ‫الحسابات الختامية‬
Financial Accounting ‫المحاسبة المالية‬
Financial Markets ‫االسواق المالية‬
Financial Statements ‫القوائم المالية‬
Financial Leverage ‫الرافعة المالية‬
Financing ‫التمويل‬
432
Finished Goods Inventory ‫مخزن البضاعة الجاهزة‬
First in First out(FIFO) ‫الوارد اوال صادر اوال‬
Firm ‫منشأ ة‬
Fiscal Year )‫سنة مالية(السنة الضريبية‬
Fixed Assets ‫موجودات ثابتة‬
Flow of Cash Statement ‫كشف التدفق النقدي‬
Funds ‫االموال‬
G
General Accepted Accounting Principles ‫المبادئ المحاسبية المقبولة قبوال عاما‬
General and administration Expenses ‫مصاريف ادارية وعمومية‬
General Journal ‫اليومية العامة‬
General Ledger ‫االستاذ العام‬
Going concern ‫االستمرارية‬
Good Debts ‫ديون جيدة‬
Good Will ‫الشهرة‬
Goods in Process inventory )‫بضاعة تحت الصنع(التشغيل‬
Governmental Accounting ‫المحاسبة الحكومية‬
Gross Loss ‫مجمل الخسارة‬
Gross Profit ‫مجمل الربح‬
Gross Sales ‫اجمالي المبيعات‬
H
Heading of Financial Statement ‫عنوان القائمة المالية‬
Historical Cost ‫التكلفة التاريخية‬

Holding Companies ‫شركات قابضة‬
Horizontal Analysis ‫التحليل االفقي‬
Human resources Accounting ‫محاسبة الموارد البشرية‬
Income )‫الدخل(الربح‬
Income Statement ‫قائمة الدخل‬
Information System ‫نظام المعلومات‬
Insolvency ‫العسر المالي‬
Installment sales ‫البيع بالتقسيط‬
433
‫‪Insurance‬‬ ‫تامين‬
‫‪Intangible Assets‬‬ ‫االصول المعنوية (الغير ملموسة)‬
‫‪Interest‬‬ ‫الفائدة‬
‫‪Internal Auditing‬‬ ‫التدقيق الداخلي‬
‫‪Inventory‬‬ ‫مخزون‬
‫‪Investment‬‬ ‫استثمار‬
‫‪Invoice‬‬ ‫فاتورة‬
‫‪Issued Stocks‬‬ ‫االسهم الصادرة‬
‫‪J‬‬
‫‪Job Order Costing System‬‬ ‫محاسبة تكاليف اوامر االنتاج‬
‫‪Joint Products‬‬ ‫المنتجات المشتركة‬
‫‪Journal‬‬ ‫دفتر اليومية‬
‫‪Journal Entry‬‬ ‫قيد اليومية‬
‫‪L‬‬
‫‪Labor Cost‬‬ ‫تكاليف العمالة‬
‫‪Land‬‬ ‫االراضي‬
‫‪Law‬‬ ‫القانون‬
‫‪Lease‬‬ ‫عقد ايجار‬
‫‪Ledger‬‬ ‫دفتر االستاذ‬
‫‪Lessee‬‬ ‫المستاجر‬
‫‪Lessor‬‬ ‫المؤجر‬
‫‪leasing‬‬ ‫تاجير‬
‫‪Liabilities‬‬ ‫المطلوبات (االلتزامات)‬
‫‪Liquidation‬‬ ‫التصفية‬
‫‪List Price‬‬ ‫قائمة االسعار‬
‫‪Loans‬‬ ‫القروض‬
‫‪Long - Term Investment‬‬ ‫استثمارات طويلة االجل‬
‫‪M‬‬
‫‪Maintenance Costs‬‬ ‫تكاليف الصيانة‬

‫‪Make of Buy Decision‬‬ ‫قرار الصنع او الشراء‬
‫‪Management‬‬ ‫ادارة‬
‫‪Managerial Accounting‬‬ ‫المحاسبة االدارية‬
‫‪434‬‬
‫‪Margin Safety‬‬ ‫هامش االمان‬
‫‪Marginal Cost‬‬ ‫التكلفة الحدية‬
‫‪Marginal Revenue‬‬ ‫االيراد الحدى‬
‫‪Market Value‬‬ ‫القيمة السوقية‬
‫‪Master Budget‬‬ ‫الموازنة الرئيسة (الشاملة)‬
‫‪Matching Principle‬‬ ‫مبدأ المقابلة (مقابلة االيرادات بالنفقات)‬
‫‪Materiality‬‬ ‫االهمية النسبية‬
‫‪Merchandise‬‬ ‫البضاعة(المخزون)‬
‫‪Merger‬‬ ‫االندماج‬
‫‪Monetary Unit‬‬ ‫الوحدة النقدية‬
‫‪N‬‬
‫‪National Accounting‬‬ ‫محاسبة قومية‬
‫‪Net Assets‬‬ ‫صافى االصوال‬
‫‪Net Capital Gain‬‬ ‫صافى المكاسب الراسمالية‬
‫‪Net Cash Flow‬‬ ‫صافي التدفق النقدي‬
‫‪Net Income‬‬ ‫صافي الدخل‬
‫‪Net Loss‬‬ ‫صافي الخسارة‬
‫‪Net Present Value‬‬ ‫صافي القيمة الحالية‬
‫‪Net Profit‬‬ ‫صافي الربح‬

‫‪Net Sales‬‬ ‫صافي المبيعات‬
‫‪Net Working Capital‬‬ ‫صافي راس المال العامل‬
‫‪Nominal Accounts‬‬ ‫الحسابات االسمية (الوهمية)‬
‫‪Non- Cash Transaction‬‬ ‫العمليات غير النقدية‬
‫‪Notes Payable‬‬ ‫اوراق الدفع‬
‫‪Notes Receivable‬‬ ‫اوراق القبض‬
‫‪O‬‬
‫‪Objectives‬‬ ‫االهداف‬
‫‪Objectivity‬‬ ‫الموضوعية‬
‫‪Opening Entries‬‬ ‫قيود افتتاحية‬
‫‪435‬‬
Opportunity Cost ‫تكلفة الفرصة البديلة‬
Overdraft ‫السحب على المكشوف‬
Owners ‫المالكين‬
Owner's Equity ‫حقوق الملكية‬
P
Paid -in Capital ‫راس المال المدفوع‬
Partner ‫شريك‬
Partnership ‫شركة اشخاص‬
Patent ‫براءة اختراع‬

Payee ‫المستفيد‬
Payment Voucher )‫مستند الصرف(الدفع‬
Payroll Accounting ‫محاسبةالرواتب‬
Period Costs ‫تكاليف الفترة‬
Personal accounts ‫الحسابات الشخصية‬
Petty Cash Book ‫دفتر صندوق المصروفات النثرية‬
Physical inventory ‫الجرد الكمي‬
Post -Closing Trial Balance ‫ميزان المراجعة الختامي‬
Posting ‫الترحيل‬
Preferred Stock ‫االسهم الممتازة‬
Prepaid Expenses ‫مصروفات مدفوعة مقدما‬
Prime Cost ‫التكلفة االولية‬
Private Accounting ‫المحاسبة الخاصة‬
Process Cost Accounting ‫محاسبة تكلفة المراحل‬
Production Budget ‫موازنة االنتاج‬
Profit ‫الربح‬
Profit Center ‫مركز الربحية‬
Profit Margin ‫هامش الربح‬
Profit -Volume analysis ‫تحليل العالقة بين الحجم والربحية‬
Progressive Tax ‫ضريبة تصاعدية‬
Project ‫مشروع‬
Promissory Note ‫ورقة كمبيالة‬
Proprietorship Single ‫ملكية فردية‬
Public Accounting ‫محاسبة عامة‬
Public Funds ‫اموال عامة‬
Q
Purchases ‫المشتريات‬
Purchases Budget ‫موازنة المشتريات‬
Purchases Day Book ‫دفتر يومية المشتريات‬
436
Purchases Power ‫القوة الشرائية‬
Purchases returns and allowances ‫مردودات المشتريات ومسموحاتها‬
Qualified Opinion Report ‫تقرير مدقق متحفظ‬
Quality ‫النوعية‬
Quantity ‫الكمية‬
Quantity Discount ‫خصم الكمية‬
Quick assets ‫اصول سريعة التحويل الى نقدية‬
Quotation ‫التسعير‬
R
Rate ‫معدل‬
Ratio ‫النسب‬
Ratio Analysis ‫تحليل النسب‬
Raw Material Inventory )‫مخزون المواد االولية(الخام‬
Real Accounts ‫الحسابات الحقيقية‬
Realization ‫التحقق‬
Receipt Voucher ‫مستند القبض‬
Recording ‫التسجيل‬
Reduction ‫تخفيض‬
Rent Earned ‫االيجار المكتسب‬
Report ‫تقرير‬
Replacement Cost ‫تكلفةاالستبدال‬
Research and Development Costs ‫تكاليف البحث والتطوير‬
Reserve ‫احتياطي‬
Responsibility Accounting ‫محاسبة المسؤولية‬
Resources ‫موارد‬
Retained Earnings ‫االرباح المحتجزة‬
Revaluation ‫اعادة تقدير‬
Revenues ‫االيرادات‬
Safety Stock ‫مخزون االمان‬

Salary ‫الراتب‬
437
‫‪Sales‬‬ ‫المبيعات‬
‫‪Sales Budget‬‬ ‫موازنة المبيعات‬
‫‪Sales Day Book‬‬ ‫دفتر يومية المبيعات‬
‫‪Sales Returns and Allowances‬‬ ‫مردودات المبيعات ومسموحاتها‬
‫‪Sales tax‬‬ ‫ضريبة المبيعات‬
‫‪Salvage Value‬‬ ‫القيمة المتبقية(قيمة الخردة)‬
‫‪Saving‬‬ ‫ادخار‬
‫‪Shareholders‬‬ ‫المساهمين‬
‫‪Short -Term Financing‬‬ ‫التمويل قصير االجل‬
‫‪Simple Entry‬‬ ‫القيدالبسيط‬
‫‪Social Sciences‬‬ ‫العلوم االجتماعية‬
‫‪Solvency‬‬ ‫القدرة على وفاء الديون(اليسر المالي)‬
‫‪Standard Costs‬‬ ‫التكاليف المعيارية‬
‫‪Statistics‬‬ ‫االحصاء‬
‫‪Straight – Line Method‬‬ ‫طريقةالقسط الثابت‬
‫‪Subsidiary Ledger Book‬‬ ‫سجل االستاذ المساعد‬
‫‪Sunk Costs‬‬ ‫التكاليف الغارقة‬
‫‪Suppliers‬‬ ‫المجهزون‬
‫‪Surplus‬‬ ‫فائض‬
‫‪Suspense Account‬‬ ‫الحساب المعلق‬
‫‪T‬‬
‫‪Tangible Assets‬‬ ‫االصول المادية الملموسة‬
‫‪Tax Accounting‬‬ ‫المحاسبةالضريبية‬
‫‪Time Value of Money‬‬ ‫القيمةالزمنية للنقود‬
‫‪Total Assets Turnover‬‬ ‫دوران اجمالي االصول‬
‫‪Trade Discount‬‬ ‫الخصم التجاري‬
‫‪Trading Account‬‬ ‫حساب المتاجرة‬
‫‪Treasury Bills‬‬ ‫سندات الخزينة‬
‫‪Trial Balance‬‬ ‫ميزان المراجعة‬
‫‪438‬‬
‫‪U‬‬
‫‪Uncollected Cheques‬‬ ‫الشيكات غير المحصلة‬

‫‪Uncontrollable Costs‬‬ ‫التكاليف التي اليمكن مراقبتها‬
‫‪Unearned Revenues‬‬ ‫االيرادات المقبوضة مقدما‬
‫‪Unit Cost‬‬ ‫تكلفة الوحدة الواحدة‬
‫‪Unit of Money‬‬ ‫وحدة النقد‬
‫‪Utility‬‬ ‫منفعة‬
‫‪V‬‬
‫‪Valuation of Assets‬‬ ‫تقييم االصول(الموجودات)‬
‫‪Value‬‬ ‫القيمة‬
‫‪Variable Costs‬‬ ‫تكاليف متغيرة‬
‫‪Vertical Analysis‬‬ ‫تحليل عمودي‬
‫‪Voucher‬‬ ‫المستند‬
‫‪W‬‬
‫‪Wages‬‬ ‫االجور‬
‫‪Warrant‬‬ ‫سند‪،‬كفالة‬
‫‪Waste Book‬‬ ‫دفتر مسودة‬
‫‪Withdrawals‬‬ ‫المسحوبات‬
‫‪Work -in- Process inventory‬‬ ‫بضاعة تحت التشغيل‬
‫‪Working Capital‬‬ ‫راس المال العامل‬
‫‪Worksheet‬‬ ‫ورقة عمل‬
‫‪XYZ‬‬
‫‪Yield‬‬ ‫العائد ‪ ،‬االيراد ‪ ،‬الغلة‬
‫‪Year- end Summarization‬‬ ‫ملخص نهاية السنة‬
‫‪439‬‬
♦References
1 Abdul Naser Nour, affarulla : Financial Accounting in
English ,3rd ,Daralmassira,Amman , Jordan 2002.
2 Basima AL-Nuimi “Commercial Correspondence”,
Second Edition, Sana’a, Yemen 2008.
3 Hardo Basuki, M.Sc:” ACCOUNTING PRINCIPLES”,
Faculty of Economics, Gadjah Mada University ,Course
code and Session: EKA 1101 & EKA 1102, Indonesia
Semester I 2005/2006.
4 John W. Day, MBA: Real Life Accounting for Non-
Accountants http://www.reallifeaccounting.com
5 Kevin Markle: Introduction to Accounting, August,
2004.
6 KHADAER K. HMOOD, "Business administration in
English & Letters writing, DAR AL -MASSIRA -
Publishing - Distributing, printing Amman Jordan 2000.
7 Libby Robert, Libby Patricia, Short Daniel:”Financial
Accounting “, 5 Editions, McGraw-Hill Irwin, USA
2005.
8 Mahesh. kochicom Final Accounts July
2008 Contribution: GeekInterview.com
9 Narayanaswamy (R.): “Financial Accounting - A
Managerial Perspective" prentice - Hall of India private
Limited, New Delhi 2000.
10 Paul H. Walgenbach , Ernest I. Hanson, Norman E.
Dittrich , Brian Gabber: “Principles of Accounting
“,Harcourt Brace 1988.
11 Pru Marriot, Edward Haward Mellet:"Introduction to
440
accounting " , Sage publication Ltd , 3 Edition ,U.K.
2002
12 Radwan Mohammad El-Anati :” Accounting in English
Language : Theory and Applications”, Second Edition
,Darsafa, Amman Jordan 2005.
13 SAMIR HADDAD, "Practical Studies in Business
English and Letter writing", Third Edition, Jordan Book
centre, Amman - Jordan.
1995.
14 Sanket Khandkar : Accounting ,
www.rajputbrotherhood.com,(RB) 2010.
15 Weygandt, Jerry J,; D.E. Kieso and P.D. Kimmel.
“Accounting Principles”, 7th Edition, John Wiley and
Sons, Inc. 2005.

441
‫رقم اإليداع في دار الكتب والوثائق ( ‪) 2010/1234‬‬
‫‪442‬‬
443
View publication stats

Accounting Part1

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Accounting Part1

Hochgeladen von

Copyright:

Verfügbare Formate

See discussions, stats, and author profiles for this publication at: https://www.researchgate.

Financial Accounting ……………………. Part 1

Book · December 2018

Saoud Chayed Mashkoor Alamry

Curriculum vitae Dr.saoud Ch. Mashkour View project

The user has requested enhancement of the downloaded file.

Dar – Al Dhiya or Printing and Designs

Accounting is the process of recording, summarizing,

The objectives of this book are to learn the students on

This book of accounting (Part 1) contains twelve chapters as

- Recording of accounting transactions

- Posting to the ledger

- Discounts, Allowances, Returns

- Errors: Classification and Rectification

1-DEFINITION OF ACCOUNTING ‫تعاريف‬

There are more definitions of accounting

►Accounting cycle ‫الدورة المحاسبية‬

The process of accounting consists (‫ )تتضمن‬the steps involved in

journal)‫ (سجل اليومية‬and ending with preparing a post – closing trial

The accounting cycle can be divided into the following steps:

(1) Analyze transactions from source documents.

The steps of accounting cycle as the following diagram:

Preparing financial Accumulation and Recording in the

The accounting is often confused (‫)غالبا ما تشوش‬with book-keeping

► Book-keeping ‫مسك السجالت‬

The Book-keeping is a mechanical process that records the routine

The accounting includes book-keeping but goes well beyond

1- Accounting observes many events and identify and measure

2- The evidence events are recorded, classified into meaningful

3- Accountants report a business activity by preparing financial

2-FUNCTION OF ACCOUNTING ‫وظائف المحاسبة‬

The main Functions of accounting can be given as Follows:

1- The accounting keeps a systematic and permanent record

2- The accounting keeps a record of revenues and expenses

3- The accounting keeps a record of assets and liabilities

4- The accounting protects (‫ (تحمي‬the property of the

5- The accounting keeps a control on expenses to minimize

6- The accounting provides Information for meeting various

2- KINDS OF ACCOUNTING ‫أنواع المحاسبة‬

In general, There are two kinds of accounting:-

1- Financial Accounting ‫المحاسبة المالية‬

It is the process of supplying )‫ (تجهيز‬financial information to parties

2- Managerial Accounting ‫المحاسبة االدارية‬

It is the process of supplying financial information for internal

Financial Accounting External Decision makers:

Managerial Accounting Internal Decision makers:

The accounting can be also, classified into the following

A- Financial Accounting ‫المحاسبة المالية‬

B- Cost Accounting ‫محاسبة التكاليف‬

C- Managerial Accounting ‫المحاسبة اإلدارية‬

D- Government Accounting ‫المحاسبة الحكومية‬

E- Tax Accounting ‫المحاسبة الضريبية‬

This classification can be distributed between two main categories

Financial Accounting Managerial Accounting

External Users of Internal Users of

For a business or organization to communicate its results and

The different users of accounting information can be classified as

5-ACCOUNTING ASSUMPTIONS,PRINCIPLES AND

Assumptions Principles Constraints

♦ Economic entity ♦Historical cost ♦Materiality

♦going – concern ♦Matching ♦Conservatism

♦unit of measurement ♦Revenue ♦Consistency

A-Accounting Concepts (Assumptions) ‫الفروض‬