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PRINCIPLES OF FINANCIAL ACCOUNTING First Edition 2020

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 PRINCIPLES
OF
FINANCIAL
ACCOUNTING

Prof. Dr.
Saoud Jayed Mashkour Alamry

‫مباديء‬
‫المحاسبة المالية‬
‫األستاذ الدكتور سعود جايد مشكور‬
‫العامري‬
First Edition
2020
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

finding their way to understand the principles,
fundamentals and technical of accounting.

Author

2020
 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
4-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

APPENDIX (3): References
 CHAPTER ( 1 )
AN INTRODUCTION
TO ACCOUNTING

 DEFINITION OF ACCOUNTING

 FUNCTION OF ACCOUNTING

 KINDS OF ACCOUTING

 USERS OF ACCOUNTING

INFORMATIONS

 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 (‫)المالكين‬
is 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 ،‫تصنيف‬، ‫(تسجيل‬
)‫ وتفسير‬،‫تقرير‬the 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 االدارية‬

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
4-USERS OF ACCOUNTING
ites
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 ‫الجمهورالعام‬
Management(Administration) ‫االدارة‬

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)
‫المبادىء‬ )‫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 االفصاح 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 ‫االهمية 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 Revenue Consistency

measurement recognition
Cost & Benefit
periodicity Full
(continuity) disclosure Substance Over
Form
Dual Objectivity
Aspect(Double
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

 BUSINESS AND ACCOUNTING

TRANSACTIONS
 TRANSACTION ANALYSIS
 DOUBLE ENTRY
 CLASSIFICATION OF ACCOUNTS
 BALANCE SHEET EQUATION
 GENERAL RULES
 GENERAL RULES OF JOURNAL
 CHAPTER ( 2 )
RECORDING
OF ACCOUNTING TRANSACTIONS

1-BUSINESS AND ACCOUNTING

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 - Increases are recorded
debit sides. by credit sides.
-Decreases are recorded by - Decreases are recorded
credit sides. by 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
2: Dr Building A/c 100000
Cr Bank's loan A/c 100000
3: Dr Building A/c 100000
Cr Accounts Payable A/c 100000
4: Dr Building A/c 100000
Cr Notes payable A/c 100000

7- GENERAL RULES OF JOURNAL

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

 THE JOURNAL
 EXPLANATION OF THE FORMAT
OF JOURNAL
  INTERESTS OF JOURNAL
 JOURNALISING
 KINDS OF ENTRIES
 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 )‫)مشتقة‬
from a Latin word "jour" means a day . Business
transactions are first entered in this book and
subsequently )‫ )وبالتتابع‬they 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 (‫ )يحدد‬and prevent (‫)يمنع‬
errors.

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) 1-1-2020 IDs 5000000 received from Ahmed as
loan to start business.
(2) 2-1-2020 Deposited IDs 5000000 in the Bank.
(3) 5-1-2020 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
1-1-2020
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- Cash A/c Dr. 5000000
2020 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

2-1-2020 Bank A/c Personal Debit Debit the Receiver 5000000

Cash A/c Real Credit Credit what goes out 5000000

Recording in the Journal

Date Particulars L.F. Debit Credit

IDs IDs
2-1-2020 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

5-1-2020 Furniture A/c Real Debit Debit what comes in 500000

Mr. Salam Co. Personal Credit Credit the giver 500000

Recording in the Journal

Date Particulars L.F. Debit Credit
IDs IDs
5-1-2020 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- 2020 Started business with IDs 10000000.
2-1-2020 Deposited in the BankIDs 2000000.
3-1-2020 Bought goods for cash IDs 1900000.
4-1-2020 sold goods for IDs 500000.
5-1-2020 Ali had taken goods worth IDs 100000 for his
private use.
6-1-2020 Received from Khalid IDs 475000 in full
settlement of IDs 485000.
7-1-2020 Paid for sundry expenses IDs
50000.
8-1-2020 Paid to Mahmud IDs 1000000 in full
settlement of IDs 1020000.
 9-1-2020 Paid for insurance IDs 175000.
10-1-2020 Cash sales IDs 1000000.

Solution:
The Journal of Ali
Date Particulars L.F Debit IDs Credit IDs
2020 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
6 Cash A/c Dr 475000
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 2020 (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
Date Particulars L.F. Debit Credit
IDs IDs
2020 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)
9 Purchases A/c Dr 30000000
To Raheem's A/c 30000000
(Being goods purchased from Raheem on credit)
10 Salam's A/c Dr 50000000
To Sales A/c 50000000
(Being goods sold to Salam on credit)
16 Stationery A/c Dr 30000000
To Cash A/c 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 . 2020 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

Date Particulars L.F. Debit Credit
IDs IDs
2020 Jan Cash A/c Dr 40000000
1 To Capital A/c 40000000
(Being capital brought into the business )
2 Purchases A/c Dr 500000
To Cash A/c 500000
(Being goods bought for cash)
3 Cash A/c Dr 300000
To Sales A/c 300000
(Being goods sold on a cash basis)
6 Motor Car A/c Dr 15000000
To Cash A/c 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)
22 Cash A/c Dr 50000
To Commission A/c 50000
(Being cash received for commission)
27 Cash A/c Dr 1200000
To Sales A/c 1200000
(Being goods sold for cash)

29 Purchases A/c Dr 600000

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
To Capital A/c 3000000

3. He b 33.He 3.brings machinery in business :-

Machinery A/c Dr 2000000
To Capital A/c 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
Machinery A/c Dr 2000000
To Capital A/c 20000000

Exercise (6)

Give a compound Journal entry for each of the

following transactions:
▪1-1-2020 Started business with goods of IDs 4000000,
Furniture of IDs 1000000 Cash IDs 2000000 and a loan of IDs
3000000 from Nasser .
▪2-1-2020 purchased goods of IDs 1000000 from Hatim and
paid him half the amount due.
▪3-1-2020 sold goods of IDs 1200000 to Falih and received
from him half the amount due.
▪5-1-2020 the proprietor withdrew for personal use IDs
100000 from the bank and IDs 400000 from office cash.
▪7-1-2020 sold goods for IDs 2000000 and received in
exchange Furniture IDs 1800000 and Stationery of IDs
200000.
Solution:
Date Particulars L.F. Debit Credit
IDs IDs
Jan. 1 Stock A/c Dr 4000000
Furniture A/c Dr 1000000
Cash A/c Dr 2000000
To Nasser's Loan A/c 3000000
To Capital A/c 4000000
(Being assets and liabilities brought in to start
the business)

2 Purchases A/c Dr 1000000

To Cash A/c 500000
To Hatim's A/c 500000
(Being goods purchased and part payment
made)
3 Cash A/c Dr 600000
Falih's A/c Dr 600000
To Sales A/c 1200000
(Goods sold and part of the amount received )
5 Drawings A/c Dr 500000
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
To Sales A/c 2000000
(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:-
1.1.2020 Purchased goods for cash IDs 2000000.
5.1.2020 Sold goods for cash IDs 20000000.
25.1.2020 Paid salaries IDs 3000000
Balance the account on 31.1.2020.

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 2020.
2020 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 )
POSTING TO THE LEDGER

 DEFINITON OF LEDGER

 PROCESS OF PREPARING THE LEDGER

ACCOUNTS

 BALANCING THE LEDGER ACCOUNTS

 CHAPTER ( 4 )
POSTING TO THE LEDGER

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)‫ (عيوب‬of the journal and to facilitate easy
collection of data, a book named "Ledger" ‫ سجل االستاذ‬is
maintained.

1-DEFINITON OF LEDGER ‫تعريف سجل االستاذ‬

The ledger contains almost all the accounts of a
business. It helps the users to get speedy and accurate (‫)دقيقة‬
information 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 (‫)زبائن‬
or debtors, it can be known only from the ledger. Various
transactions pertaining )‫ )يالئم‬to different dates of a particular
account may be spread over ( ‫ )توزع‬in 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 االستاذ‬
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 (‫)يظهر‬
c/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:

Date Particulars L.F. Debit Credit

IDs IDs

2020 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 )

9 Purchases A/c Dr 1500000

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.

Date Particulars J.F Amount Date Particulars J.F Amount
2020 To Capital A/c 5000000 2020 By Furniture A/c 3000000
March 1 March 5
Capital A/c
Date Particulars J.F Amount Date Particulars J.F Amount
2020 By Cash A/c 5000000
March 1
Furniture's A/c

Date Particulars J.F Amount Date Particulars J.F Amount

2020 To Cash A/c 3000000

March 5

Purchase's A/c
Dr.
Cr.
Date Particulars J.F Amount Date Particulars J.F Amount
2020 To Salam's A/c 1500000
March 9

Salam’s A/c
Date Particulars J.F Amount Date Particulars J.F Amount
2020 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 2020 :-
1-1-2020 Rahim started business with a capital of IDs 15000000.
2-1-2020 He purchased goods from Maher on credit IDs 2000000.
3-1-2020 He paid cash to Maher IDs 1000000.
4-1-2020 He sold goods to Senan IDs 2000000.
5-1-2020 He received cash from Senan IDs 3000000.
6-1-2020 He further purchased goods from Maher IDs 2000000.
7-1-2020 He paid cash to Maher IDs 1000000.
8-1-2020 He further sold goods to Senan IDs 20000000.
9-1-2020 He received cash from Senan IDs 10000000.
19-1-2020 Paid in to Bank IDs 10000000.
20-1-2020 Amount withdrawn from Bank for personal use IDs 2000000.
30-1-2020 Paid salaries to staff IDs 3000000.
31-1-2020 Received cash from Senan IDs 25000000.
31-1-2020 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 2020.
 Solution:
(1)Journal of Rahim
Date Particulars L.F. Debit Credit
IDs IDs
2020
January 1 Cash A/c Dr 15000000
To Rahim's capital A/c 15000000
(Being commencement of business )
2 Purchases A/c Dr 2000000
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
To Sales A/c 2000000
(Being goods sold to Senan )
5 Cash A/c Dr 3000000
To Senan's A/c 3000000
(Being cash received from Senan)
6 Purchases A/c Dr 2000000
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
To Sales A/c 20000000
(Being goods sold to Senan)
9 Cash A/c Dr 10000000
To Senan's A/c 10000000
(Being Cash received from Senan)
19 Bank A/c Dr 10000000
To Cash A/c 10000000
(Being Cash deposited in to bank )
20 Drawings A/c Dr 2000000
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
To Senan's A/c 25000000
(Being Cash received from Senan )
31 Drawings A/c Dr 2000000
To Purchases A/c 2000000
(Being goods with drawn for personal use)
TOTAL 98000000 98000000
 (2)Ledger Accounts

Cash A/c
Dr. Cr.
Date Particulars J.F Amount Date Particulars J.F Amount
IDs IDs

2020 Jan 1 To Capital A/c 15000000 2020 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.
2020 Jan. 31 To balance c/d IDs 2020 Jan. 1 By Cash A/c IDs 15000000
15000000

15000000 15000000
2020 Feb. 1 By Balance b/d 15000000

Purchases A/c
Date Particulars Amount Date Particulars Amount
IDs IDs

2020 2020
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
2020 To Balance b/d 2000000
Feb. 1
 Maher's A/c
Date Particulars Amount Date Particulars Amount
IDs IDs

2020 2020
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
2020 By Balance b/d 2000000
Feb. 1

Senan's A/c
Date Particulars Amount Date Particulars Amount
IDs IDs

2020 2020
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
2020 By Balance b/d 16000000
Feb. 1

Sales A/c
Date Particulars Amount Date Particulars Amount
IDs IDs

2020 To Balance c/d 22000000 2020 By Senan's A/c 2000000

Jan.31 Jan.4 By Cash A/c 20000000
Jan.8
22000000
2020 By Balance b/d 22000000
Feb. 1
 Bank A/c
Date Particulars Amount Date Particulars Amount
IDs IDs

2020 2020
Jan.19 To Cash A/c 10000000 Jan.21 By Drawings A/c 2000000
Jan.31 By Balance b/d 8000000
10000000 10000000
2020 To Balance c/d 8000000
Feb. 1

Drawings A/c
Date Particulars Amount Date Particulars Amount
IDs IDs

2020 To Bank A/c 2000000 2020 By Balance c/d 4000000

Jan.21 To Purchases 2000000 Jan.31
Jan.31 A/c

4000000 4000000
2020 To Balance b/d
Feb. 1

Salaries A/c
Date Particulars Amount Date Particulars Amount
IDs IDs

2020 To Cash A/c 3000000 2020 By Balance c/d 3000000

Jan. 30 Jan. 31

3000000 3000000
2020 To Balance b/d 3000000
Feb. 1
 TRIAL BALANCE
As on 31st January 2020
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 2020.
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 2020.
2020 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

 DEFINITIN OF TRIAL BALANCE

 METHODS OF PREPARING THE TRIAL
BALANCE
 OBJECTS OF TRIAL BALANCE
 MAIN CHARACTERISTICS AND USES OF
A TRIAL BALANCE
 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 (‫ )اداة 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 31st Dec, 2020
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 اعداد 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 االرصدة‬

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 (‫ )اساس‬for 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 االخطاء‬
at 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 المالي‬
) of the company.

Accounting Final
Trial
accounts
Procedures balance
5-LIMITATIONS OF A TRIAL BALANCE ‫محددات‬
‫ميزان المراجعة‬
(1)Trial balance is not a conclusive proof (‫ )اثبات‬for 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 ( ‫االخطاء‬
‫)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 2020.
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 ( 1.1.2020) 46800000
2 Returns Inwards 8600000
3 Purchases 321700000
4 Freight and Carriage 18600000
5 Rent and Taxes 5700000
6 Salaries and Wages 9300000
7 Sundry Debtors 24000000
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
16 Cash in hand 380000
17 Travelling expenses 870000
18 Drawings 40000000
19 Capital 86690000
20 Sales 389600000
21 Returns Outwards 5800000
22 Sundry Creditors 14800000
23 Loan @ 6% 20000000
24 Miscellaneous income 250000
25 Discount Earned 4190000

Required: Prepare a Trial Balance of Mr. "Ali" as at 31st

December 2020.
 Solution:
Trial Balance of Mr. "Ali" as at 31st December
2020.
Serial Names of The Accounts L.F Debit Balance Credit Balance
No. IDs IDs

1 Stock (1.1.2020) 46800000

2 Returns Inwards 8600000
3 Purchases 321700000
4 Freight and Carriage 18600000
5 Rent and Taxes 5700000
6 Salaries and Wages 9300000
7 Sundry Debtors 24000000
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
16 Cash in hand 380000
17 Travelling expenses 870000
18 Drawings 40000000
19 Capital 86690000
20 Sales 389600000
21 Returns Outwards 5800000
22 Sundry Creditors 14800000
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 2020
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 2020:

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
2020 (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:-

2020 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:-

2020 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 2020 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:-
2020 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 2020.


 CHAPTER ( 6 )
DISCOUNTS,ALLOWANCES
AND RETURNS

 TYPES OF DISCOUNTS

 PURCHASES RETURNS AND

ALLOWANCES

 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.

(3)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
12,2020 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
To Sales A/c 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 1 Cash Discount is
given by the seller to the given by the creditor to
buyer. the debtor.
2 Trade Discount is 2 Cash Discount is
given to increase the given for early
sales. payment or timely
payment.
3 Trade Discount is 3 Cash Discount is
given at the time of given at the time of
purchase of goods. settlement of debts.
4 Trade Discount is 4 Cash Discount is not
deducted from the deducted from the
invoice. invoice.

5 Trade Discount is not 5 Journal Entries for cash

appearing in the books discount are entered in
of 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, 2020, 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
5,2020 Quantity Discount payable A/c Dr 300000
To Sales A/c 5000000
(IDs 5000000 Credit sales with 10%
Quantity Discount )
31.12,2020 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:
Date Particulars Debit Credit
June, Purchases A/c Dr 5000000
5,2020 To Creditors (Sameer) A/c 4700000
To Quantity Discount Received A/c 300000
(IDs 5000000 Credit purchase with
10% Quantity Discount)

31.12,2020 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, 2020.
(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
13,2020 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
15,2020 To Debtors A/c 2000000
(Being Allowance for Unsatisfactory goods(
May, Debtors A/c Dr 56000000
19,2020 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
21,2020 Sales Discounts A/c Dr 400000
To Debtors A/c 40000000
(Being collected from debtors less discount)
May, Cash A/c Dr 5600000
30, 2020 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
13,2020 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
15,2020 To Purchase Returns and 2000000
Allowance A/c
(Being Returned "unsatisfactory
goods to supplier)
May, Purchases A/c Dr 56000000
19,2020 To Creditors A/c 56000000
(Being purchased goods on credit
at discount of 30 percent term 1/10,
n/60)
May, Creditors A/c Dr 40000000
21,2020 To Cash A/c 39600000
To Purchase Discounts A/c 400000
(Being paid creditors for goods
within discount period)
May, Creditors A/c Dr 56000000
30, 2020 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)

Date Particulars Debit Credit

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, 2020 is IDs 6000000,

new investments by the owner 4000000, and drawings
2000000, net income for 2020 is 3000000, net owner's equity
on December 31,2020 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

 CASH TRANSACTIONS

 CREDIT SUBSIDIARY BOOKS

 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 للمقبوضات 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 2020.
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. 2020.

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
31 By Balance c/d 18400000

30500000 30500000
2020
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
2020.

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.

2020 2020
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
30 By Balance c/d 2000000

260000 46640000 75000 46640000

2020 To balance b/d 260000 2000000 2020 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 2020.

2020 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 2020
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
2-CREDIT SUBSIDIARY BOOKS

‫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 2020:
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
2020 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

2020 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 2020 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 اوراق 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 اوراق 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 2020:
-April 2. layeith signed a bill for Amal company at IDs
1000000 due at May, 10,2020.
- 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
31/5/2020.
- April 30. Zaid signed a bill at IDs 300000 due at 30/7/2020.
- April 30. Amal company signed a bill at IDs 150000 due at
31/8/2020 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
2020
April 2. Layeith May, 10, 2020 1000000
20. Nabeel May, 5, 2020 400000
30. Zaid July, 30, 2020 300000
Total 1700000
Notes (Bills) Payable Book
Date Name of Supplier (Drawer) Due date amount IDs
2020
April 12. Samawah Cement Co. June, 12,2020 500000
30. Suhail Aug, 31, 2020 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, 2020 3000000 by Ahmad 1000000
To sales 2000000 by purchases 3000000
To capital 3500000 by telephone 100000
expenses
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 2020 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:

- 2020 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 – 2020.
-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:
- 2020 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:
- 2020 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:
- 2020 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 Manhoud worth IDs 500000.
- March 8 Made cash purchases IDs 250000.
- March 10 Returned goods to Ibrahim IDs 100000.
- March 15 Goods returned by Mehmoud 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:
- 2020 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:
- 2020 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:
- 2020 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.
- 2020 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 2020, and post them into the ledger:
- 2020 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 2020:
- 2020 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.

32- Answers of some previous questions in chapter (7):

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)

 CHEQUES
 PROMISSORY NOTE
 BILL OF EXCHANGE
 CHAPTER ( 8 )

COMMERCIAL PAPERS (NOTES)

‫االوراق 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

(‫ )الساحب‬to 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 2020.
(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.

10- Answers of some previous questions in chapter (8):

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

 CLASSIFICATION OF ERRORS

 GENERAL CLASSIFICATIONS

 RECTIFICATION OF ERRORS

 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 االخطاء‬

Accounting errors are classified as:

►Errors relating to Agreement of Trial Balance
‫االخطاء المتعلقة بمطابقة ميزان المراجعة‬
A- Errors not disclosed by the Trial Balance
‫االخطاء 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 ‫اخطاء 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 ‫االخطاءالمعوضة‬
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 ‫اخطاء ارتكابية‬

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 ‫اخطاء 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 ‫اخطاء 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 ‫اخطاء 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 االخطاء‬

(A)Errors affecting one Account

These types of errors may occur due to the following reasons:-

1. Wrong Castings ‫اخطاء التنظيم‬

2. Wrong balancing ‫اخطاء الترصيد‬

3. Wrong posting ‫اخطاء 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 To Cash A/c To Ismail A/c
500000 500000 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. Totalling 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

Machinery A/c Dr 780000

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

Suspense A/c Dr. 300000

3 To Customers A/c 300000

Suspense A/c Dr. 1000000

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.
 Solution:
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
To Suspense A/c 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)
4 Purchases A/c Dr 125000
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
To Suspense A/c 220000
( Hashim’s debit balance Omitted from
debtors set right)
6 Suspense A/c Dr 152000
To Purchases A/c 152000
(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.
Solution:
Journal Proper
Date Particulars L.F Debit Credit
IDs IDs
1 Purchases A/c Dr 100000
To Suspense A/c 100000
( 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)
3 Suspense A/c Dr 39000
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
To Suspense A/c 50000
(Being the correction of overcasting of sales
book)
5 Returns Outwards A/c Dr 75000
Returns Inwards A/c Dr 75000
To Suspense A/c 150000
(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).

14- Answers of some previous questions in chapter (9):

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 )
FINANCIAL STATEMENTS

 DEFINITION OF FINAL ACCOUNTS

 TRADING ACCOUNT

 PROFIT AND LOSS ACCOUNT

 BALANCE SHEET
 CHAPTER ( 10 )

FINANCIAL STATEMENTS

‫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 ×××
To Sales Returns ××× Returns ×××
To Freight-in ××× By Closing Stock
×××
To P. & L. A/c ××× By P. & L. A/c
[Gross Profit c/d [Gross Loss c/d
(if there is a profit)] (If there is a loss)]
××× ×××
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 ×××
purchases, Sales inventory ×××
returns and direct To purchases ×××
expenses to Trading To freight in ×××
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:

Explanation Entry Dr Cr
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:

Explanation Entry Dr Cr
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 االرباح 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 2. The object of profit and loss
is to ascertain gross profit or account is to ascertain net profit
gross loss by comparing the cost or net loss by taking into
price with the selling price of the consideration all revenues and
goods. 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, 2020

Name of Company…….
Balance Sheet
as on 31st December, 2020

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 ××
Less Reserve for bad )××) advance ××
debts (New Reserve) ×× Reserves ××
Closing Stock ×× Capital ××
Prepaid Expenses ×× Add Net Profit ××
Land and Building ×× Add Additional Capital ××
Plant and Machinery ×× Add Interest on capital )××)
Furniture and ×× Less Drawings )××)
Fixtures Less Interest on )××)
Drawings
Less Net Loss

××× ×××
 Preparation of Balance Sheet as Per American System:

FOURAT Corporation

Balance Sheet as December 31, 2020

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, 2020(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,
2020.
2. Prepare balance sheet as of Dec, 31, 2020.
3. Record the closing entries at Dec, 31, 2020.
 Solution:

Capital balance = 40000 - 20000 = ID 20000

Salah-Aldine Company
Trading Account
For the year ended Dec, 31, 2020

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

Salah-Aldine Company
Profit and loss account
For the year ended Dec, 31, 2020

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
 Salah-Aldine Company
Balance sheet as of Dec., 31, 2020
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 2020 (Amounts in IDs).

Debt balances

Stock (1-1-2020) 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, 2020 the stock on hand was valued at cost 7860000
IDs.

Required:

1. Prepare the trading Account for the year ended 31-12-2020.

2. Prepare the Profit and Loss Account for the year ended 31/12/2020
3. Prepare the Balance Sheet as on 31/Ì2/2020.
 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 Freight – in

allowances
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 2020 for
Quick meal restaurant:

Particulars Amounts IDs

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
30,2020.
C: Record the closing entries.
8-The following balances are showed at Dec. 31, 2020 for Ali's
company:
Particulars Amounts IDs
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 2020.
2-Prepare income statement for the year ended Dec, 31, 2020
3-Prepare trading A/c, profit and loss account.
4-Prepare the balance sheet as of Dec. 31, 2020.
5-Write the closing entries.
9- Answers of some previous questions in chapter (10):

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

 BUSINESS LETTERS:
DEFINITION,FUNCTIONS,QUALITIES

 CHARACRTRASTICS OF EFFECTIVE
BUSINESS LETTERS

 PARTS OF BUSINESS LETTERS

 HOW TO PREPARE YOUR LETTER?

 CORRESPONDENCES BY INTRNET
 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:
DEFINITION,FUNCTIONS,QUALITIES

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(‫ (تحاول‬to 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 ‫انواع 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 االعمال‬

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،‫)معرفة‬
of the reader's aims while at the same time attains (‫ )بلوغ‬your aims too.

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 (‫)غيرمتاثرة‬, 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 واالخالص‬

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.

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:-

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.

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: -

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.
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
…………………………………………………………………………………
………………………………………………………………………………….

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

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 , 2020
(2) 31st December , 2020

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:

(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 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, 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

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 ‫االجزاء 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.............................

Body
...................................................................................................................
...................................................................................................................
Complimentary Close
Signature
(d)Reference Initials........................
(e)Enclosure Notation......................
(f)Carbon Copy Notation................
(g)Post Script...................................
(h)Second pages...............................
4-HOW TO PREPARE YOUR LETTER?

‫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
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 ‫ التصحيح‬، ‫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

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.
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.
8-Avoid monotony- introduce variety.
9- Pay special attention to the opening and closing paragraphs.
10- Check your letter.
5- CORRESPONDENCES BY INTRNET

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
( [email protected] ) .
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 ".
 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.
 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:-
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., 2020 or
Feb. 28, 2020.
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./2020/27.
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 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 2020.
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 no. 326 dated. 12th March
2020, 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.
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, 2020
 (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.
 Test Questions

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):

(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.

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 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.
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.

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.

11-The following business letter was occurred between two commercial

companies.
Dijlah Aluminum Co.
Al-Sadoon Street 223
Bagdad-IRAQ
6th, Feb, 2020

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?
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 --- ---


 CHAPTER ( 12 )
BUSINESS ACTIVITIES

 FORMS OF BUSINESS FIRMS

 COMMERCIAL AND ECONOMIC ACTIVITIES

 MARKETING AND DISTRIBUTION ACTIVITIES

 SHOPS AND STORES

 CHAPTER ( 12 )
BUSINESS ACTIVITIES
‫أنشطة األعمال‬

1- FORMS OF BUSINESS FIRMS

‫اشكال منشات االعمال‬
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 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.

 Business Enterprise ‫شركة االعمال‬

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 االعمال‬
 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 ‫ادارة االعمال‬

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 االعمال‬
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 الراسمالية‬
Are the goods used in process of production and they stay for long
period in the using and not for selling.

3-MARKETING AND DISTRIBUTION ACTIVITIES ‫انشطة‬

‫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
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

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

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(‫ )بقالية‬shopping needs.
Supermarket ‫السوق المركزي‬
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.

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

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.
 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.

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………………
(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.
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


 APPENDIX (1)
NATURE OF ACCOUNTS
‫طبيعة الحسابات‬

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 إنارة‬ ‫مدين‬
‫مدينة‬
Accounts Payable (A/c) ‫حسابات دائنة‬ ‫دائن‬ Transportation (A/c) ‫نقل‬ ‫مدين‬
Notes receivable (A/c) ‫أوراق قبض‬ ‫مدين‬ Commission (A/c) ‫عمولة‬ ‫مدين‬
Notes Payable(A/c) ‫أوراق دفع‬ ‫دائن‬ Purchases (A/c) ‫مشتريات‬ ‫مدين‬
Assets(A/c) ‫أصول‬ ‫مدين‬ Returned purchased ‫مردودات‬ ‫دائن‬
(A/c) ‫مشتريات‬
Current Assets(A/c) ‫أصول‬ ‫مدين‬ Sales (A/c) ‫مبيعات‬ ‫دائن‬
‫متداولة‬
Fixed Assets(A/c) ‫اصول ثابتة‬ ‫مدين‬ Returned sales(A/c) ‫مردودات‬ ‫مدين‬
‫مبيعات‬
Liabilities (A/c) ‫التزامات‬ ‫دائن‬ Rent income (A/c) ‫دخل اإليجار‬ ‫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) ‫إيرادات‬ ‫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) ‫أرباح 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 إدارية‬ ‫مدين‬
expenses(A/c)
Interest (A/c) ‫فائدة‬ ‫دائن‬/‫مدين‬ Freight expenses(A/c) ‫مصاريف شحن‬ ‫مدين‬
Wages (A/c) ‫أجور‬ ‫مدين‬ General revenues(A/c) ‫إيرادات عامة‬ ‫دائن‬
Advertising (A/c) ‫إعالن‬ ‫مدين‬ Exceptional ‫مصاريف‬ ‫مدين‬
expenses(A/c) ‫عرضية‬
Repairs expenses (A/c) ‫مصاريف‬ ‫مدين‬ Exceptional ‫إيرادات عرضية‬ ‫دائن‬
‫تصليح‬ revenues(A/c)
 ‫)‪APPENDIX (2‬‬
‫‪TERMINOLOGY‬‬
‫المصطلحات المحاسبية والمالية‬
‫المصطلح اإلنكليزي‬ ‫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
‫‪Accounting Cycle‬‬ ‫الدورة المحاسبية‬
‫‪Accounting Elements‬‬ ‫عناصر المحاسبة‬
‫‪Accounting Entity‬‬ ‫الوحدة المحاسبية‬
‫‪Accounting Equation‬‬ ‫المعادلة المحاسبية‬
‫‪Accounting Machines‬‬ ‫اآلت المحاسبة‬
‫‪Accounting Methods‬‬ ‫طرق المحاسبة‬
‫‪Accounting Periods‬‬ ‫الفترات المحاسبية‬
‫‪Accounting Principles‬‬ ‫مبادئ المحاسبة‬
‫‪Accounting Procedures‬‬ ‫اإلجراءات المحاسبية‬
‫‪Accounting Reports‬‬ ‫التقارير المحاسبية‬
‫‪Accounting Statements‬‬ ‫القوائم المحاسبية‬
‫‪Accounting System‬‬ ‫النظام المحاسبي‬
‫‪Accounting Treatment‬‬ ‫معالجة محاسبية‬
‫‪Accounting theory‬‬ ‫النظرية المحاسبية‬
‫‪Accounts Chart‬‬ ‫جدول أو خريطة الحسابات‬
‫‪Account Manual‬‬ ‫دليل الحسابات‬
‫‪Accounts payable‬‬ ‫ذمم دائنة(الحسابات الدائنة)‬
‫‪Accounts Receivable‬‬ ‫ذمم المدينة(الحسابات المدينة)‬
‫‪Accrual basis‬‬ ‫أساس االستحقاق‬
‫‪Accrued Expenses‬‬ ‫المصاريف المستحقة‬
‫‪Accrued Revenues‬‬ ‫اإليرادات المستحقة‬
‫‪Accumulated depreciation‬‬ ‫االندثار(اإلهالك) المتراكم‬
Activity ‫نشاط‬
Adjusted trial Balance ‫ميزان المراجعة المعدل‬
Adjusted Entries ‫قيود التسوية‬
Administration cost ‫تكاليف اإلدارة‬
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 األصول‬
Audit ‫تدقيق‬
Authorized Capital ‫راس المال المصرح به‬
B
Bad debts ‫ديون معدومة‬
Balance Sheet ‫ميزانية عمومية‬
Balancing ‫الترصيد‬
Bankruptcy ‫اإلفالس‬
Beginning inventory ‫مخزون أول المدة‬
Benefits ‫منافع‬
Bill of exchange ‫ورقة سحب‬
Bill Payable book ‫دفتر يومية أوراق الدفع‬
Bill Receivable book ‫دفتر يومية أوراق القبض‬
Bonds ‫سندات طويلة األجل‬
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) ‫أعباء صناعية‬
Business administration ‫إدارة أعمال‬
C
Capital ‫راس المال‬
Capital Assets (Fixed Assets) )‫موجودات رأسمالية(أصول ثابتة‬
Capital Decrease ‫نقص راس المال‬
Capital Expenditures ‫مصاريف راس مالية‬
Capital Gains or Losses ‫ خسائر رأسمالية‬/‫أرباح أو‬
Capital Increase ‫زيادة راس المال‬
Cash Book ‫سجل نقدية‬
Cash Deficit ‫عجز النقدية‬
Cash Discount ‫خصم نقدي‬
Cash flow ‫التدفق النقدي‬
Cheque )‫شيك(صك‬
Classification ‫تصنيف‬
Closed account ‫الحساب المغلق‬
Clients )‫زبائن (عمالء‬
Closing Entries ‫قيود اإلقفال‬
Closing Stock ‫مخزون أخر المدة‬
Compensating Errors ‫األخطاء المعوضة‬
Compound Entry ‫قيد مركب‬
Commerce ‫تجارة‬
Commission ‫عمولة‬
Company ‫شركة‬
Corporation ‫شركة مساهمة‬
Conservatism ‫التحفظ‬
Consistency ‫ التناسق‬، ‫الثبات‬
Cost of Goods Sold ‫تكلفة البضاعة المباعة‬
Credit Balance ‫رصيد دائن‬
Credit Note ‫إشعار دائن‬
Sales on Credit ‫مبيعات آجلة‬
Creditors ‫الدائنون‬
Current Assets ‫أصول متداولة‬
Current liabilities ‫خصوم متداولة‬
D
Data ‫معلومات‬
Debit balance ‫رصيد مدين‬
Debit note ‫إشعار مدين‬
Deficit ‫عجز‬
Depletion ‫نفاذ‬
Depreciation )‫إهالك(اندثار‬
Disclosure ‫اإلفصاح‬
Discount ‫الخصم‬
Discount allowed ‫خصم مسموح به‬
Disposal of fixed assets ‫االستغناء عن األصول 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 ‫تأجير المعدات‬
Equities ‫الخصوم‬
Errors of commission ‫أخطاء ارتكابية‬
Errors of duplication ‫أخطاء مكررة‬
Errors of omission )‫أخطاء الحذف(السهو‬
Errors of principle ‫أخطاء فنية‬
Estimated Statements ‫البيانات التقديرية‬
Expenses ‫مصاريف‬
F
Final Account ‫الحسابات الختامية‬
Financial Accounting ‫المحاسبة المالية‬
Financial Markets ‫األسواق المالية‬
Financial Statements ‫القوائم المالية‬
Financial Leverage ‫الرافعة المالية‬
Financing ‫التمويل‬
Finished Goods Inventory ‫مخزن البضاعة الجاهزة‬
First in First out(FIFO) ‫الوارد أوال صادر أوال‬
Firm ‫منشأ ة‬
Fiscal Year )‫سنة مالية(السنة الضريبية‬
Fixed Assets ‫موجودات ثابتة‬
Flow of Cash Statement ‫كشف التدفق النقدي‬
Funds ‫األموال‬
G
General Accepted Accounting ‫المبادئ المحاسبية المقبولة قبوال عاما‬
Principles(GAAP)
General and administration ‫مصاريف إدارية وعمومية‬
Expenses
General Journal ‫اليومية العامة‬
General Ledger ‫األستاذ 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 ‫إجمالي المبيعات‬
H
Heading of Financial Statement ‫عنوان القائمة المالية‬
Historical Cost ‫التكلفة التاريخية‬
Holding Companies ‫شركات قابضة‬
Horizontal Analysis ‫التحليل األفقي‬
Human resources Accounting ‫محاسبة الموارد البشرية‬
I
Income )‫الدخل(الربح‬
Income Statement ‫قائمة الدخل‬
Information System ‫نظام المعلومات‬
Insolvency ‫العسر المالي‬
Installment sales ‫البيع بالتقسيط‬
Insurance ‫تامين‬
Intangible Assets )‫األصول المعنوية (الغير ملموسة‬
Interest ‫الفائدة‬
Internal Auditing ‫التدقيق الداخلي‬
Inventory ‫مخزون‬
Investment ‫استثمار‬
Invoice ‫فاتورة‬
Issued Stocks ‫األسهم الصادرة‬
J
Job Order Costing System ‫محاسبة تكاليف أوامر اإلنتاج‬
Joint Products ‫المنتجات المشتركة‬
Journal ‫دفتر اليومية‬
Journal Entry ‫قيد اليومية‬
L
Labor Cost ‫تكاليف العمالة‬
Land ‫األراضي‬
Law ‫القانون‬
Lease ‫عقد إيجار‬
Ledger ‫دفتر األستاذ‬
Lessee ‫المستأجر‬
Lessor ‫المؤجر‬
‫‪leasing‬‬ ‫تأجير‬
‫‪Liabilities‬‬ ‫المطلوبات (االلتزامات)‬
‫‪Liquidation‬‬ ‫التصفية‬
‫‪List Price‬‬ ‫قائمة األسعار‬
‫‪Loans‬‬ ‫القروض‬
‫‪Long - Term Investment‬‬ ‫استثمارات طويلة األجل‬
‫‪M‬‬
‫‪Maintenance Costs‬‬ ‫تكاليف الصيانة‬
‫‪Make of Buy Decision‬‬ ‫قرار الصنع أو الشراء‬
‫‪Management‬‬ ‫إدارة‬
‫‪Managerial Accounting‬‬ ‫المحاسبة اإلدارية‬
‫‪Margin Safety‬‬ ‫هامش األمان‬
‫‪Marginal Cost‬‬ ‫التكلفة الحدية‬
‫‪Marginal Revenue‬‬ ‫اإليراد الحدي‬
‫‪Market Value‬‬ ‫القيمة السوقية‬
‫‪Master Budget‬‬ ‫الموازنة الرئيسة (الشاملة)‬
‫‪Matching Principle‬‬ ‫مبدأ المقابلة (مقابلة اإليرادات بالنفقات)‬
‫‪Materiality‬‬ ‫األهمية النسبية‬
‫‪Merchandise‬‬ ‫البضاعة(المخزون)‬
‫‪Merger‬‬ ‫االندماج‬
‫‪Monetary Unit‬‬ ‫الوحدة النقدية‬
‫‪N‬‬
‫‪National Accounting‬‬ ‫محاسبة قومية‬
‫‪Net Assets‬‬ ‫صافى األصول‬
‫‪Net Capital Gain‬‬ ‫صافى المكاسب الرأسمالية‬
‫‪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 ‫أوراق الدفع‬
‫‪Notes Receivable‬‬ ‫أوراق القبض‬
‫‪O‬‬
‫‪Objectives‬‬ ‫األهداف‬
‫‪Objectivity‬‬ ‫الموضوعية‬
Opening Entries ‫قيود افتتاحية‬
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 أشخاص‬
Patent ‫براءة اختراع‬
Payee ‫المستفيد‬
Payment Voucher )‫مستند الصرف(الدفع‬
Payroll Accounting ‫محاسبة الرواتب‬
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 ‫األسهم الممتازة‬
Prepaid Expenses ‫مصروفات مدفوعة مقدما‬
Prime Cost ‫التكلفة األولية‬
Private Accounting ‫المحاسبة الخاصة‬
Process Cost Accounting ‫محاسبة تكلفة المراحل‬
Production Budget ‫موازنة اإلنتاج‬
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 ‫أموال عامة‬
Q
Purchases ‫المشتريات‬
Purchases Budget ‫موازنة المشتريات‬
Purchases Day Book ‫دفتر يومية المشتريات‬
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 ‫أصول سريعة التحويل إلى نقدية‬
Quotation ‫التسعير‬
R
Rate ‫معدل‬
Ratio ‫النسب‬
Ratio Analysis ‫تحليل النسب‬
Raw Material Inventory )‫مخزون المواد األولية(الخام‬
Real Accounts ‫الحسابات الحقيقية‬
Realization ‫التحقق‬
Receipt Voucher ‫مستند القبض‬
Recording ‫التسجيل‬
Reduction ‫تخفيض‬
Rent Earned ‫اإليجار المكتسب‬
Report ‫تقرير‬
Replacement Cost ‫تكلفة االستبدال‬
Research and Development Costs ‫تكاليف البحث والتطوير‬
Reserve ‫احتياطي‬
Responsibility Accounting ‫محاسبة المسؤولية‬
Resources ‫موارد‬
Retained Earnings ‫األرباح المحتجزة‬
Revaluation ‫إعادة تقدير‬
Revenues ‫اإليرادات‬
S
Safety Stock ‫مخزون األمان‬
Salary ‫الراتب‬
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 األجل‬
‫‪Simple Entry‬‬ ‫القيد البسيط‬
‫‪Social Sciences‬‬ ‫العلوم االجتماعية‬
‫‪Solvency‬‬ ‫القدرة على وفاء الديون(اليسر المالي)‬
‫‪Standard Costs‬‬ ‫التكاليف المعيارية‬
‫‪Statistics‬‬ ‫اإلحصاء‬
‫‪Straight – Line Method‬‬ ‫طريقة القسط الثابت‬
‫‪Subsidiary Ledger Book‬‬ ‫سجل األستاذ المساعد‬
‫‪Sunk Costs‬‬ ‫التكاليف الغارقة‬
‫‪Suppliers‬‬ ‫المجهزون‬
‫‪Surplus‬‬ ‫فائض‬
‫‪Suspense Account‬‬ ‫الحساب المعلق‬
‫‪T‬‬
‫‪Tangible Assets‬‬ ‫األصول المادية الملموسة‬
‫‪Tax Accounting‬‬ ‫المحاسبة الضريبية‬
‫‪Time Value of Money‬‬ ‫القيمة الزمنية للنقود‬
‫‪Total Assets Turnover‬‬ ‫دوران إجمالي األصول‬
‫‪Trade Discount‬‬ ‫الخصم التجاري‬
‫‪Trading Account‬‬ ‫حساب المتاجرة‬
‫‪Treasury Bills‬‬ ‫سندات الخزينة‬
‫‪Trial Balance‬‬ ‫ميزان المراجعة‬
‫‪U‬‬
‫‪Uncollected Checks‬‬ ‫الشيكات غير المحصلة‬
‫‪Uncontrollable Costs‬‬ ‫التكاليف التي ال يمكن مراقبتها‬
‫‪Unearned Revenues‬‬ ‫اإليرادات المقبوضة مقدما‬
‫‪Unit Cost‬‬ ‫تكلفة الوحدة الواحدة‬
‫‪Unit of Money‬‬ ‫وحدة النقد‬
‫‪Utility‬‬ ‫منفعة‬
‫‪V‬‬
‫‪Valuation of Assets‬‬ ‫تقييم األصول(الموجودات)‬
‫‪Value‬‬ ‫القيمة‬
‫‪Variable Costs‬‬ ‫تكاليف متغيرة‬
‫‪Vertical Analysis‬‬ ‫تحليل عمودي‬
‫‪Voucher‬‬ ‫المستند‬
‫‪W‬‬
‫‪Wages‬‬ ‫األجور‬
‫‪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 ‫ الغلة‬، ‫ اإليراد‬، ‫العائد‬
Year- end- Summarization ‫ملخص نهاية السنة‬
♦References ‫المصادر‬

1 Abdul Nasser Nour, affarulla (2002): "Financial

Accounting in English" ,3rd ,Daralmassira,Amman ,
Jordan 2002.
2 Basima AL-Nuimi (2008): “Commercial
Correspondence”, Second Edition, Sana’a, Yemen 2008.
3 Hardo Basuki, M.Sc (2006):” 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 (2004): "Introduction to Accounting",
August, 2004.
6 KHADAER (K.) HMOOD, (2000):"Business
administration in English & Letters writing", DAR AL -
MASSIRA - Publishing - Distributing, printing Amman,
Jordan 2000.
7 Libby Robert, Libby Patricia, Short Daniel (2005):
"Financial Accounting ", 5 Editions, McGraw-Hill
Irwin, USA 2005.
8 Mahesh. kochicom Final Accounts July
2008 Contribution: http//www.Geekinterview.com/
9 Narayanaswamy (R.) (2000) : “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 (1988): “Principles of
Accounting “,Harcourt Brace 1988.
11 Pru Marriot, Edward Haward Mellet
(2002):"Introduction to accounting ", Sage publication
 Ltd , 3 Edition ,U.K. 2002
12 Radwan Mohammad El-Anati (2005):” Accounting in
English Language : Theory and Applications”, Second
Edition , Dar-Safa, Amman Jordan 2005.
13 SAMIR HADDAD (1995):"Practical Studies in Business
English and Letter writing", Third Edition, Jordan Book
Centre, Amman - Jordan. 1995.
14 Sanket Khandkar (2010) : Accounting ,
www.rajputbrotherhood.com , (RB) 2010.
15 Weygandt, Jerry (J.); (D.E.) Kieso and (P.D.) Kimmel.
(2005) :“Accounting Principles”, 7th Edition, John
Wiley and Sons, Inc. 2005.

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