Basic Accounting Terms | Chapter 2 | Class 11 | Accounts
Rajat Arora・2 minutes read
Accounts tell the financial story of a business through transactions impacting its financial position, involving changes in assets, liabilities, and capital. Understanding income versus profit is crucial, with income representing total revenue earned and profit being the surplus after deducting all expenses.
Insights
- Transactions in business impact the financial position and are recorded in accounts, reflecting the economic activities that change a business's assets, liabilities, and capital.
- Understanding the distinction between income and profit is crucial, where income represents total revenue earned, while profit is the surplus after deducting all expenses, with more revenue leading to profit and more expenses leading to a loss.
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Recent questions
What are assets in business?
Properties or resources providing future benefits.
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Summary
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Understanding Business Accounts and Financial Transactions
- Accounts are the language of business, representing the financial story of a business through transactions that impact its financial position.
- Business transactions involve economic activities that change the financial status of a business, affecting assets, liabilities, and capital.
- Events are the results of transactions, reflecting the consequences and outcomes of business activities.
- Capital is the money introduced by the owner into the business, essential for starting and running operations.
- Drawings refer to the money withdrawn from the business by the owner for personal use, distinct from business transactions.
- Liabilities are amounts owed by the business to outsiders, encompassing loans, payments for goods, or services.
- Assets are properties or resources owned by the business that provide future benefits, including cash, property, or investments.
- Revenue is the amount received from selling goods or services, while expenses are the costs incurred in manufacturing and selling products.
- Income is the surplus of revenue over expenses, representing the profit generated by the business.
- Differentiating between income and profit is crucial, with income reflecting the total revenue earned, and profit being the surplus after deducting all expenses.
14:12
Understanding Accounting Basics and Joining Chintu Ant Gang
- An account is a place where transactions of similar nature are recorded, with all positive items on one side.
- Accounts are divided into two sides, with the left side known as debit and the right side as credit.
- Profit is calculated as Total Revenue minus Total Expense, with more revenue leading to profit and more expenses resulting in a loss.
- Loss can occur when total expenses exceed total revenue, or from events like fire or unexpected gains like winning a lottery.
- Purchases refer to buying goods for business, while sales involve selling goods, with returns from customers termed as sales return.
- Joining a Telegram channel named Chintu Ant Gang Class 11 is recommended for access to notes, assignments, tests, and revision materials.
