* Liabilities- Liabilities means amount which business takes from outsider and its business obligation to repay

such amount at due date . It is also known as External liabilities of the business

As per Business Entity concept has its separate legal entity and its differ from its business man . Any amount
invested by business man in business as Capital is a Liability of the business , business has to repay such amount
to the business man after specific period , so the capital also a liability of the business however it is an internal
liability.

Liability of a business is classifies into three big categories such as :-

Non-current / long term liabilities – long term liabilities are those liabilities which are payable by the business
after a long period generally more than one year. For example- loan, debenture

Current liabilities – These are short term liabilities which company has to pay within one year time. For example-
creditors, shorts term loans.

Contingent Liabilities – These are not the real liabilities of the business, these are the conditions which are exits
at the date of the balance sheet which may leads future liabilities which may or may not arises in future. For
example- Penalties under any law, chances of filling of case by creditor or other party against business
Jo tera tha nhi , wo tera hai nhi

*Capital- capital is the amount invested by the business man in the business .It may be in cash or
assets. It is the internal liability of the business, it is also known as owner’s equity.

*Expenses – Expenses are the amount spent by the business. Expenses are classified into two categories such as;

Capital expenditure- It is the Expenditure where amount spent to purchase assets which will increase
the earning capacity of the business, benefit of expenditure is received for more than one year. For example –
purchase of machinery. Capital Expenditures are shown in the balance sheet as assets.
Car , Moter bike

Revenue expenditure – Revenue expenditure are those in which amount spend by organization to meet its
regular obligations such as salaries, rent, interest, other expenses. This will not increase the earning capacity if
the business however its helps in maintaining its earning capacity.
Petrol , Diesel

Income- Income is the amount earned by the business during the period of time

Khi se bhi ,jaha se bhi aye bas yrr ana chahiye

Others important terms

Profit: The excess of revenues over its related expenses during an accounting year is profit.
Profit = Revenue - Expenses

Gain: A non-recurring profit from events or transactions incidental to business such as sale of fixed assets,
appreciation in the value of an asset etc.

Loss: The excess of expenses of a period over its related revenues is termed as loss.
Loss = Expenses - Revenue

Goods: The products in which the business deal in. The items that are purchased for the purpose of resale and
not for use in the business are called goods.

Purchases: The term purchases is used only for the goods procured by a business for resale. In case of trading
concerns it is purchase of final goods and in manufacturing concern it is purchase of raw materials. Purchases may
be cash purchases or credit purchases.

Purchase Return: When purchased goods are returned to the suppliers, these are known as purchase return.

Sales: Sales are total revenues from goods sold or services provided to customers. Sales may be cash sales or
credit sales.

Sales Return: When sold goods are returned from customer due to any reason is known as sales return.

Debtors: Debtors are persons and/or other entities to whom business has sold goods and services on credit and
amount has not received yet. These are assets of the business.

Creditors: If the business buys goods/services on credit and amount is still to be paid to the persons and/or
other entities, these are called creditors. These are liabilities for the business.

Bill Receivable: Bill Receivable is an accounting term of Bill of Exchange. A Bill of Exchange is Bill Receivable for
seller at time of credit sale.

Bill Payable: Bill Payable is also an accounting term of Bill of Exchange. A Bill of Exchange is Bill Payable for
purchaser at time of credit purchase.

Discount: Discount is the rebate given by the seller to the buyer. It can be classified as :

1. Trade Discount: The purpose of this discount is to persuade the buyer to buy more goods. It is offered at
an agreed percentage of list price at the time of selling goods. This discount is not recorded in the
accounting books as it is deducted in the invoice/cash memo.
2. Cash Discount: The objective of providing cash discount is to encourage the debtors to pay the dues
promptly. This discount is recorded in the accounting books.

Account : Account refers to a summarized record of relevant transaction of particular head at one place.

Stock : The goods available with the business for sale on a particular date is known as stock.
 Accounting concept
These accounting concept are universally applicable and accepted by all accounting institutes.
These are backbone of Accountancy, they are as follows. (Deemed nature, Mandatory)

#1-Business Entity Concept: - According to this concept business is considered separate from its business man
all transaction are viewed and recorded in the books of accounts from the business point of view and not business man
point of view,. The owner is treated as a creditor (Internal liability) for his investment in the business,

Agr ye concept na hota to capital ka janm na hua hota

Money Measurement Concept: - According to this concept only those transaction are recorded in the books of
accounts which can be measures in terms on money only and those transaction which are not measures in terms of
money are not recorded on books of accounts This concept states that money is the common denominator in recording
all transaction.

Isi concept ki wajeh se ek limitations ayi accounts ki , agr ye concept na hota to hum wo
sab kuch record kar sakte jo ki money m convert nhi hote like – honesty, environment

Going Concern Concept: - According to this concept it is assumed that business will continue for an Indefinite
period and there is no intention to close the business

Business anant kal tk chalta rhega , issi concept ki wajeh se fixed assets and long term liabilities
ka janm hua

Cost Concept: - This concept is for assets of the company, according to this concept all assets are recorded it the
books of the accounts at the value which are spend for its purchase that is assets are recorded at purchase cost of it and
same will be reduced for the depreciation point of view.

isi cocept ki wajeh se hum market price ko ignore kr dete hai …ye bhi ek llimitation hai accounts ki

Dual Aspect Concept: - According to dual aspect concept, every transaction entered into enterprises must have
two effects. These two effects must be of equal amount for Example,

Is conept ki wajeh se hi to debit and credit ka janm hua

Revenue Recognition Concept: - according to this concept revenue should be recognized when ownership is
transferred , Possession is transferred and certainty to received money is arise.

Matching Concept: - According to matching concept all the cost which is incurred to earn the revenue should be
recognized as expenses in the period when revenue is recognized, The matching principle facilitates the
ascertainment of the amount of profit earned or loss incurred in a particular period by deducting the related
expenses from the revenue recognized in that period.

isi concept ki wajeh se outstanding expenses, prepaid expenses jaisi chijo janm hua

Accrual Concept: - As per this concept, a transaction is recorded at the time when it take place and not when the
settlement take place

Paisa matter nhi karta , transaction matter karti hai ……. Accrued income , advance income jaisi chijo ka
bhi janm hua

Verifiable Objective Concept: - This Concept states that Accounting should be free from all personal bias All
accounting transaction should be evidenced and supported by business documents.

Bina bhawanao m bahe transactions ko record krni hai ,,fir chahe dil kuch bhi bole –har chij ka evidence( bill)
hona jruri h.

Accounting Conventions (non-mandatory)

Convention of full disclosure:- According to this convention there should be complete and understandable
reporting on the financial statement of all the significant of all the significant information relating to the
economic of the business

Convention of consistency- according to this convention any accounting practice once adapted and
selected should be applied consistently year after year. This convention helps in making financial statement capable
of being comparable from previous year to current year

Prudence concept- This statement states that financial statement must presented a realistic picture of
enterprises at can easily understandable with English saying that ‘ Do not anticipate a Profit ,but provide all
possible losses’ and “it takes into consideration all prospective losses but not the prospective profits/ gains “ it is
also known as conservatisms approach.

Being a baniya , not a punjabi

Materiality concept-only those items or information should be disclosed that have a material effect and are
relevant to the users. So, an item having an insignificant effect or being irrelevant to user need not be disclosed
separately, it may be merged with other item.

main main chijo ko alag se dikhao aur faltu ki bato pr jyda focus mt kro