I.Com Part II

Single Entry 1. Single Entry System: Under this system some times both aspects of a transaction are recorded, some times only one aspect is recorded and some times no aspect is recorded in the books of accounts. 2. Double Entry System: Under this system, both aspects of a transaction are recorded. One aspect is debit and other is credit. 3. Difference: Single Entry Double Entry Under this system some times both aspects of a Under this system, both aspects of a transaction transaction are recorded, some times only one are recorded. One aspect is debit and other is aspect is recorded and some times no aspect is credit recorded in the books of accounts. 4. Book keeping: Recoding of monetary transactions in the books of accounts in a systematic manner is called book keeping. 5. Statements of affairs: It is a sort of balance sheet having assets at one side and liabilities and capital at other  side. 6. Opening Statement of affairs: It is a sort of balance sheet having assets at one side and liabilities and capital at other  side, which shows financial position of a business in the beginning of the year. 7. Closing Statement of affairs: It is a sort of balance sheet having assets at one side and liabilities and capital at other  side, which shows financial position of a business at the end of the year. 8. Net worth method: Under this method, net profit or net loss of a business is determined by following formula. Closing Capital + Drawing - Opening Capital - Further Capital - Interest on Capital  9. Conversion Method: Preparing of final account from incomplete records in single entry system is called Conversion method.

Consignment 10. Consignment: It is an act of sending goods g oods by the owner of the goods to his agent at risk for the purpose of sale. 11. Consignor: The person who sends his goods go ods to his agent at risk for the purpose p urpose of sale is called consignor. 13. Consignee: The person to whom goods good s are sent by consignor for the purpose of sale is called consignee. 14. Consignment Outward: When the goods are consigned, it is called consignment outward according to the consignor's point of view. . Consignment Inward: When the goods are consigned, it is called consignment inward according to the consignee's point of view. 16. Account Sale: The detail of sale, expenses, commission commission and unsold stock which is sent by consignee to consignor is called account sale. 17. Performa Invoice: The forwarding letter containing name, quantity, and price sent by consignor to consignee is called performa invoice. 18. Del Creder Commission: The additional commission, which is paid by consignor to consignee, if loss in case of   bad debts is born by consignee. 20. Overriding Commission: The additional commission which is paid by con signor to consignee for introducing new  product in the market is called overriding commission. 21. Normal Loss: The loss, which occurs due to natural causes, is called normal loss.

(e.g.) Leakage, Loss in weight due to nature of goods. 22. Abnormal Loss: The loss, which occurs due to theft, fire, and accident, is called abnormal loss. 23. Direct Expenses: All the expenses on a consignment from the business place of consignor up to the godown of consignee are called direct expenses. 24. Stock on Consignment / Unsold Stock: The part of a consignment, which remains unsold, is called unsold stock or stock on consignment. 25. Consignment Account: The account of a particular consignment, which is prepared to determine p rofit or loss of  the consignment, is called consignment account.

Partnership 26. Partnership: The relation between two or more persons who have agreed to share profits of a business carried by all or any one of them acting for all. 27. Business: Every legal activity undertaken for earning profit is called b usiness. 28. Kinds of Partners: i. Active partner or Working partner ii. Sleeping Partner or Dormant Partner The partner who takes an active part in the The partner who makes only investment and management of the firm is called active partner  does not take any active part in the or working partner. management of the firm is called sleeping  partner or dormant partner. iii. Senior Partner iv. Junior Partner The partner having more experience and more The partner having less experience and less investment in the business is called senior  investment in the business is called junior   partner. He also receives more profit of the  partner. He also receives less profit of the  business.  business. v. Major Partner vi. Minor Partner The partner who is 18 years old or above the The partner who is under the age of 18 years is age of 18 years is called major partner. called minor partner. vii. Partner in profits only The partner who only receives profits of the firm and does not contribute in the losses of the firm is called partner in profits only. 29. Types of Partnership: i. Partnership at will ii. Particular Partnership iii. Limited Partnership 30. Fixed Capital: The capital is called fixed capital if the partners are not allowed to change it except extra ordinary cases. 31. Fluctuating Capital: The capital is called fluctuating capital if the partners are allowed to change it at any time. 32. Old Ratio: With the admission of a new partner the sharing ratio of profit and loss is changed, the  previous ratio is called old ratio. 33. New Ratio: With the admission of a new partner the sharing ratio of profit and loss is changed, the  present ratio is called new ratio. 34. Sacrifice Ratio: The difference between old ratio and new ratio is called sacrifice ratio. Sacrifice Ratio = Old Ratio - New Ratio 35. Good Will: The benefit of the good name of the business is called good will. It is a force, which attracts the customers. 36. Dissolution of Partnership: The end of the life of a partnership is called dissolution of partnership. 37. Partnership Agreement / Partnership Deed: The written agreement between the partners regarding the partnership is called  partnership deed or partnership agreement. 38. Revaluation Account:

The account, which is prepared at the time of death, admission, or retirement of a partner  for increasing or decreasing of assets and liabilities, is called revaluation account. 39. Realization Account: The account, which is prepared at the time of dissolution of partnership to determine the  profit or loss of the business, is called realization account. 40. Number of partners in a firm: The minimum limit of number of partners in a firm is 2 and maximum is 20. However, in case of banking business the maximum limit is10. 41. Insolvency: Inability of a person to pay his all debts is called insolvency. 42. Insolvent Partner: The partner who is not able to pay his all debts is called insolvent partner. 43. Retired Partner: The partner who leaves the partnership is called retired partner.

Depreciation 44. Depreciation: It is the gradual and permanent decrease in the value of an asset from any cause. 45. Depletion: It is the decrease in the value of a wasting asset i.e. Oil Well, Mine, Forest etc. 46. Obsolescence: It is the decrease in the value of an asset due to inventions, change in people habits, taste etc. 47. Fluctuation: The decrease or increase in the market value of an asset (gold, silver etc.) is called fluctuation. 48. Amortization: The decrease in the value of an intangible asset (good will, copy right, patent etc.) is called amortization. 49. Causes of Depreciation: 1. Wear and tear  2. Obsolescence 3. Depletion 4. Expiry of time 5. Fall in market price 50. Scrape / residual / break up value: The price at which the asset may be sold after completion of working life is called scrape / residual / break up value. 51. Fixed installment / original cost / straight-line method: Under this method, an equal depreciation is charged to an asset every year. Formula: Annual depreciation = Cost - break up value Estimated working life 52. Diminishing value / declining value / reducing value / decreasing value / written down value method: Under this method a fixed percentage of depreciation is charged to an asset on it book  value every year. Formula: R = 1-n s c R= rate of depreciation  N= number of years S= scrape value C= cost of asset 53. Book value: The remaining value of an asset after deducting its depreciation is called book value.

Non-trading concern 54. Non-trading concern:  Non-trading concern is a legal organization, which is formed to provide social benefit to its members as well as public without any profit-earning motive. 55. Trading concern:

Trading concern is a legal organization, which is formed for earning profit by running a legal business. Difference: Non-trading concern Trading concern  Non-trading concern is a legal organization, Trading concern is a legal organization, which which is formed to provide social benefit to its is formed for earning profit by running a legal members as well as public without any profit-  business. earning motive. 56. Receipts and Payment Account: The summary of the cash book of a non-trading concern is called receipts and payment account. 57. Income and Expenditure Account: The account whereby a non-trading concern determines it's surplus or deficit balance during a particular period. 58. Surplus Balance: The excess of the income of a non-trading concern over its expenses is called surplus  balance. 59. Deficit Balance: The excess of the expenses of a non-trading concern over its income is called deficit  balance. 60. Sources of Income: 1. Entrance fee 2. Subscription 3. Interest on investment 4. Locker's rent 5. Donation 6. Sale of old newspapers 7. Sale of drinks etc. 61. Entrance fee: The fee, which is paid by a person to non-trading concern to get its membership, is called entrance fee. 62. Subscription: The monthly or annually contribution of the n on-trading concern's members to nontrading concern is called subscription. 63. Donation: The amount, which is paid by a person to non-trading concern as a gift, is called donation. 64. Legacy: The amount or property received by a non-trading concern as per will of a person after  His death is called legacy. 65. Special Subscription: The amount received by a non-trading concern for any special purpose is called special subscription. 66. Capital Fund: The excess of total assets over external liabilities of a non-trading concern is called capital fund. 67. Honorarium: The payment to a person who is not employ of the non-trading concern and such amount is paid him as a gift against his services for the non-trading concern.

Company 68. Company: A company is an artificial person created by law having a separate legal entity with a  permanent existence and common seal. 69. Separate legal entity: It means a company has its own entity and therefore is not affected by the death, retirement, and insolvency of any shareholder. 70. Common seal: The stamp bearing the name and logo of a company, used by the directors of the company to sign the contracts on the behalf of the company is called common seal. 71. Preliminary expenses: The expenses that are incurred in the process of the formation of a company are called  preliminary expenses.

72. Memorandum of Association (MOA): The structure of a company is based upon the MOA. This is a primary document, which set out the constitution of the company. 73. Article of Association (AOA): This is the secondary document of a company, which contains rule and regulations, governs the internal management of a company. 74. Promoters: The persons who take necessary steps to form a company with the reference to g iven objects are called promoters. 75. Part time Promoters: The promoters that are not professional in the formation of companies but still perform as  promoters are called Part time Promoters. 76. Holding Company: The company, which holds more than 50% shares of other company, is called holding company. 77. Subordinate / subsidiary company: The company whose more than 50% shares are held by other company is called subordinate / subsidiary company 78. Prospectus: According to companies, ordinance 1984 prospectus means "any notice, circular, invitation, or advertisement offering the general public to purchase shares or debentures of the company." 79. Statement in lieu of prospectus: If a company does not issue its prospectus due to any particular reason, it must file a statement like prospectus with the registrar office, which is called statement in lieu of   prospectus. 80. Certificate of commencement: The certificate to start the business that is issued by the registrar to the company after the completion of the process of incorporation is called certificate of commencement. 89. Authorized / Registered Capital: The maximum amount of share capital which a company is authorized to issue is called authorized / registered Capital. 90. Issued Capital: The part of an authorized capital, which is offered to public to purchase, is called issued capital. 91. Subscribed Capital: The part of issued capital which public applies to purchase is called subscribed capital. 92. Called up Capital: The part of subscribed capital that is called up by the company is called called up capital. 93. Paid up Capital: The part of called up capital that is actually paid by the shareholders is called paid up capital. 94. Share: The authorized capital is divided into several small equal units, each unit is called share. 95. Incorporation certificate: When a company is registered under the companies' ordinance 1984, a certificate is issued to promoters, which is called incorporation certificate. 96. Public limited Company: In a public limited company at least 50 %, shares are held by the govt. the minimum limit of shareholders is 7 and maximum unlimited. 97. Private limited Company: In a private limited company, all shares are hold by private persons. The minimum limit of shareholders is 2 and mix mum limit is 50. 98. Limited Company: In a limited company, the liability of shareholders is limited up to the value of shares  purchased. 99. Preference shares: The shares on which fix rate of dividend is paid to the shareholders before the ordinary shareholders are called preference shares 100. under writers: The persons who undertake to purchase the shares of a company, which will not  purchased by public are, called under writers. 101. under writing commission:

The commission received by under writers against their undertaking is called under  writing commission. 102. Debentures: The certificates issued by the public limited company to the creditors for the security of  debts are called debentures. 103. Debenture stock: A converted debenture into share is called debenture stock. 104. over subscription: If a company receive more applications than it's offering share is called over subscription. 105. under subscription: If a company receive less applications than it's offering share is called under subscription. 106. Shareholder: Shareholder is the owner of the company. 107. Debenture holder: Debenture holder is the creditor of the company. Some Other Questions 108. Financial Accounting: An art of recording, summarizing, analyzing, and interpreting of financial data of a  business is called financial accounting. 109. Cost Accounting: The branch of accounting which relates to the analyzing and controlling of cost of   production is called cost accounting. 110. Managerial / Management Accounting: The branch of accounting that provides necessary information to the management and enables to take suitable decision. 111. Assets: Assets are the properties of a business both tangible and intangible. (e.g.) building, cash, machinery, good will etc. 112. Tangible Assets: The assets, which can be touched and felt, are called tangible assets. (e.g.) building, cash, machinery etc. 113. Intangible Assets: The assets which can not be touched, seen and felt are called intangible assets. (e.g.) good will, patent, copy right etc. 114. Fixed Assets: The assets that are brought into the business for a long period are called fixed assets. (e.g.) building, furniture, machinery etc. 115. Current Assets: The assets having short life and easily convertible into cash are called current assets. (e.g.) bank, cash, B/R, debtors etc. 116. Liquid Assets / Quick Assets: Cash and the assets that can be quickly converted into cash are called liquid assets / quick  assets. (e.g.) bank, cash, B/R, etc. 117. Long Term liabilities: The liabilities that are payable after a long period are called long-term liabilities. 118. Short Term liabilities: The liabilities that are payable after a short period are called short-term liabilities.