Chapter 2: Basic Accounting Terms

Introduction

• Lecture by आप यदि फालना on Basic Accounting Terms.
• Importance of the chapter for students from Class 4 to 12.
• The session aims to clarify fundamental accounting concepts through a story.

Story: The Business Idea

• आप decides to start a business focusing on unique flavored रसगुल्ले (sweet dumplings).
• Identifies a niche market by creating different flavors: chocolate, strawberry, mango.

Key Accounting Concepts

Capital

• The total investment in the business was ₹150,000 (₹100,000 in cash + ₹50,000 in goods).
• This amount represents the capital of the business.

Proprietorship

• आप becomes the proprietor of the business, meaning the owner who invests capital.

Assets

• Assets are economic resources that help conduct business, e.g., cash, inventory (रसगुल्ले).
• Types of assets:
  • Current Assets: Can be converted into cash within a year.
  • Non-current Assets: Long-term resources (e.g., machinery).

Liabilities

• Liabilities are amounts owed by the business to outsiders. Types include:
  • Current Liabilities: Due within a year (e.g., short-term loans).
  • Non-current Liabilities: Due in more than a year (e.g., long-term loans).

Drawing

• Drawings: Amount withdrawn by the proprietor for personal use.
  • Example: Withdrawing ₹20,000 for personal expenses reduces capital.

Revenue

• Revenue is the income generated from sales of goods or services.
• Recognizes when services are performed or products sold.

Expenses

• Expenses are costs incurred in the operation of the business.
  • Types:
    • Capital Expenditure: Long-term benefits (e.g., purchasing equipment).
    • Revenue Expenditure: Short-term costs (e.g., rent, salaries).

Debt and Credit

• Debtors: Customers who owe money to the business (e.g., Mr. Rajesh for credit sales).
• Creditors: Suppliers to whom the business owes money.

Financial Statements

• Balance Sheet: Shows the financial position of the business, including assets, liabilities, and capital.
• Trading Account: Shows gross profit or loss from operations.
• Profit and Loss Account: Displays revenue and expenses to determine net profit or loss.

Conclusion

• The chapter covered basic accounting terms fundamental to understanding business operations.
• Encouragement to revise and practice real-life applications of these concepts.
• Homework: Revise Chapter 2 and answer the short questions provided.