Jahan University

Vice Chancellor office

Economic faculty
Hr Department

:Subject name
PRINCIPAL OF ACCOUNTING
Semester: 1Ist

Lecture: 02

Prepared by: Ahmad Sharaf Shams year: 1403

 Table of content

Topic 1:Accounting Terminology

Topic 2: Accounting Cycle
 Objective and usage in the organizations
 To understands the various terminology of accounting
 To understands the accounting cycle
Accounting Terminologies
• It is a general term and includes any activity undertaken for the
Business
purpose of earning profits such as buying and selling of goods.

Proprietor •A person who invests the money or things in the business is called as owner or proprietor.

Transaction •Any dealing between two or more persons for goods or services which affect the financial
‫معامالت‬ position of a business.

•Any written evidence of business transaction is called voucher. The voucher may be Bill,
Voucher ‫سند‬ invoice etc.

Invoice •A written evidence/document given by the seller to the buyer for credit sale of goods is
‫بل‬ called invoice.

Account •It is a device which contains a systematic record of increase or decrease in an item during
‫حساب‬ a particular period of time.

•Company's legal financial debts or obligations that arise during the course of business
Liabilities ‫دیون‬ operation
Accounting Terminologies
• the cost of goods/service purchased is called purchases. When the price of goods
Purchases purchased is paid in cash, it is called cash purchase and when it is paid on any future
dates, it is called credit purchases.

• the amount earned from sales of goods is called sales. If this price is received in cash, it is called
Sales cash sales and when it is to be received on some future dates, it is called credit sales

Revenues ‫حاصالت‬ • All sorts of income received or accrued are called as revenues

Expenses • To activate the objectives of business, certain payments are made

Profit • the excess amount over the expenses is called profit

Loss
• the Lower amount over the expenses is called profit
Accounting Terminologies
Capital
• The total cash and others assets contributed by the owner.
‫سرمایه‬

Cash discount • A discount which is allowed or received at the time of cash receipt or cash payment
before the due date.

Discount received • It is a deduction granted at the time of payment to creditors for purchases.

Discount allowed • It is a deduction allowed at the time of cash receipt from the debtors for sales.

• Any charge for services or task performed.

Commission

Stock (Inventory) • Maintaining of goods or merchandise on hand at any time is called as stock.
‫کدام‬
Turnover • It means the total amount of sales during a particular period. It is also called as stock
‫حجم معامالت‬ turnover or inventory turnover.
Accounting Terminologies
Accounts
Receivable/ Debtors • A person to whom goods are sold on credit is called accounts receivable or debtors.

Accounts Payable/ • A person from whom goods are purchased on credit is called as accounts payable are
Creditors creditors

• The amount which is finally written off as uncollectable is called bad debts. It is treated
Bad debts as loss of business.

• The estimated amount of debtors which are expected to become bad debts during the
Doubtful debts
coming period are called as doubtful debts.

Outstanding expenses • It means those expenses which have been incurred but not actually paid. These are
‫مخارج نا پرادخت شده‬ called as accrued expenses or unpaid expenses

Prepaid expenses • it means the expenses which have been paid in advance but not yet expired. It is also
‫مخارج پیش پرداخت‬ called as unexpired expenses or expenses paid in advance.
Accounting Terminologies
Accrued income • The income that is earned during the period but not yet been received is called as accrued
‫حاصالت بعد حصول‬ income.

Unearned income Any income which has been received in advance but not earned in current year is called unearned
‫حاصالت پیش حصول‬ income.

• Anything valuable possessed by a firm with the following three features qualifies as assets;
• a. The legal title of ownership
Assets ‫دارایی‬ • b. Right to use
• c. Right to sale
Current Assets ‫دارایی‬ • Which are either cash or easily convertible into cash.
‫جاری‬
Fixed Assets • Are those assets which for long-term use and are not likely to be converted quickly into
cash, (Tangible and Intangible).
‫دارایی ثابت‬ • These assets are acquired to retain and use in business operation
Equities • The rights possessed by owners or outsiders against the assets of the firm are called as
‫سهام‬ equities.
Drawings
• The cash or commodities withdrawn from business for personal use
‫برداشت مالک‬
Accounting Terminologies
Financial
• The report which are prepared by the accountants to show the
statements
results of the business at the end of particular period.
‫صورت حساب مالی‬

Income
statement • The Report of profit earned or loss suffered is calculated at the end
‫صورت حساب مفاد و‬ of accounting period.
‫تاوان‬

• Balance sheet represents the financial position of the firm for

Balance sheet
financial period.

Accounting cycle • when a business transaction occurs, it is recorded in various

statements.
‫دوران محاسبوی‬
Accounting Cycle
 Accounting Cycle
Journalization of Transactions
Identification of events and transactions as they occur
Posting to Ledger
Transferring the journal debits and credits to the proper ledger accounts.
Trial Balance and Adjustments
Includes the preparation of various worksheets to prove debits equal credits,
Preparing Financial Statements
Company's balance sheet, income statement, and statement of assembly of accounting
information
Closing Accounts
Reducing the balance of temporary accounts to zero in preparation for the Journalization
After-Close Trial Balance
Following the closing of accounts and adjustments, this step proves that debits are still equal
to credits
Summary and Student evaluation
The estimated amount of debtors which are expected to become bad debts
during the coming period are called as doubtful debts.
Homework and next week’s topic:
Analysis and Classifying the Transaction
Types of Accounts