1. Explain the following concepts
An account is summarized record of transactions relating to a particular person, particular asset, particular liability, specific head of an expense or income recorded at one place.
It is amount invested in the business by its owners. It may be in the form of cash, goods, or any other asset
Property of any kind owned by a businessman is called an asset. The ownership of the Asset must be with business unit. Example: - Land, Building, Plant, Machinery, Furniture, Motor car etc.
It is an obligation of financial nature to be settled at a future date. Examples of Liabilities are Bills Payable, Bank Overdraft, and Creditors etc.
If the owner withdraws any money or goods or assets from the business for his personal use, it is called as drawings.
Example, A proprietor pays college fees of his son, takes his family for a tour and paid the petrol charges from business.
These are tangible article or commodity in which a business deals.
E.g. for Soap manufacturing company “Soap” is a Good.
A person who has to pay to the business for getting goods and services on credit is known as debtor. A debtor is a person who owes money to the business.
A creditor may be a bank, supplier or person that has provided credit to a company. In other words, a company owes money to its creditors.
If a person’s assets are more than liabilities, or equal to his liabilities, he is called as a solvent person. Such person is financially sound and is in a position to pay off all his debts.
e.g.: A person’s total assets have been calculated to Rs. 50, 00,000 and his total debts were Rs. 30,00,000. Since his position is sound he is able to pay off his debts therefore he is called Solvent.
A person who is not in a position to pay off his total debts from his total assets is called as an insolvent person. Such person’s liabilities are more than assets.
e.g.: A person’s total assets or property have been calculated to Rs. 20,00,000 and his total debts were Rs. 50,00,000 and if he is not in a position to get any amount from any sources and if the court. Is so satisfied then he will be declared as an insolvent person.
A purchase means to take possession of a given asset, property, item or right by paying a predetermined amount of money for the transaction to be completed successfully.
In other words, its’ an exchange of money for a particular good or service.
In accounting, sales refer to the revenues earned when a company sells its goods, products, services etc.
13. Bad Debts
Bad debts expense is also referred to as uncollectible accounts expense or doubtful accounts expense. Bad debts expense results because a company delivered goods or services on credit and the customer did not pay the amount owed.
14. Variable cost
Variable costs are costs that change as the quantity of the good or service that a business produces changes.
15. Fixed Cost
A fixed cost is an expense or cost that does not change with an increase or decrease in the number of goods or services produced or sold.
16. Semi Variable Cost
Semi-variable cost, also known as a semi-fixed cost or a mixed cost, is a cost composed of a mixture of both fixed and variable components. Costs are fixed for a set level of production or consumption, and become variable after this production level is exceeded.