Notesale: Turn your study into money

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LKD
commerce
{CLASS 11}
CHAPTER-1
1
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BASIC DEFINATIONS1
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It is any
physical object which have value in terms of money
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2
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For every assets of
the business someone has paid for it and the amount is paid to someone for this
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The equity may be divided into two parts:
(i) Owner’s equity
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Owner’s equity-It is regarded as owners claim which is known as capital
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FORMULA:: OWNER’S EQUITY+OUTSIDER’S EQUITY=ASSETS
LIABILITIES +

CAPITAL

=ASSETS

ACCOUNTING EQUATION
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PURCHASE-The purchase of raw material for production and purchase of finished goods for sale is called
purchases
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Sales may be cash sales or credit sales
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In
simple, debtors is the person from whom the money is to be received
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It is the person to whom the money has to be paid
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It may cash or in kind
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It is calculated as:
CAPITAL+LIABILITIES=ASSETS
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11
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The stock may be raw material,
work in progress or finished goods
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EX- Furniture purchased is considered as goods for furniture dealer
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REVENUE-It is the amount of the business earned by selling its product or providing services to customers called sales
revenue
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EX-salaries paid,postage,advertisement,etc
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EXPENDITURE-It is the amount incurred for recurring and non-recurring business transaction
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Expenditure are of 2 types(i)Revenue expenditure
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(iii)Deffered revenue expenditure
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EX-Salaries,rent,insurance,etc
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EX-purchase of land & building,vechiles,etc
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EX-heavy expenditure on product advertisement
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LOSS-Loss is an unwanted burden on the business which does not generate any revenue for the business
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Loss always decreases the owner’s equity
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PROFIT-Excess of total revenue over total expenses of an accounting period is called profit
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So,INCOME=REVENUE – EXPENSES
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DISCOUNT-The reduction in the price in payment of goods allowed by the business enterprises to its customers is called
discount
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It is
deducted in the invoice/cash memo from gross sale profits
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(ii)Cash discount-The discount which is given by the creditor to the debtor to receive the early or quick payment
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It is an expense or one type of loss for the creditor and income or gain for the
debtor
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LIABILITIES- It is the amount which arises from the purchase of goods and services on credit or any loan taken from
banks, Financial institutions, third party to finance the business
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PURCHASE RETURN- It is also known as return outward
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24
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When part of goods sold is returned back by the seller for the
defective quality is called sales return
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NET WORTH- The ownership interest in a business is known as net worth

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