Financial Accounting

Sir Muhammad Asif Nadeem

 Important Definitions
Business
Any activity undertaken or the purpose of earning profit such as buying and selling
of goods rendering services and manufacturing goods.

Manufacturing Concerns
The business organizations which are engaged in producing goods are called as
manufacturing Concerns
 Types of Businesses

Services Concerns
The business organizations which are engaged in providing any services are called
services concerns.

Merchandizing of Trading Concerns

The business organizations which are engaged in buying and selling of goods are
called merchandizing of trading Concerns.
 Assets
All valuable things possessed by a business firm are called Assets. Assets have
following three features.

1) The legal tittle of ownership.

2) Right to use
3) Right to sale/dispose off.
 Equities

Equities are the rights possessed by the owners or outsiders against the assets of the
firm.

1) Owner Equity:
The capital invested by the owner of the business or the claim of
the owner on the assets of the business is called owner Equity.

2) Liabilities:
Liabilities are the claims of outsiders against the assets of the business.
The liabilities are also called external equities.
 Proprietor

A person who invests the money or thing in the business is called owner or
proprietor.

Invest capital into business

Gives time and attrition to the business
He is entitled to receive the profit and bear the loss of the business.
 Transactions

Any dealing between two or more persons for goods or

services which effect the financial position of a business
 End of 1 st

Lecture