Purchases

 Buying goods or merchandise from seller is recorded in books of accounts as purchases.

For example: Aslam purchase computers for Rs. 100,000.

Cash Purchases

Credit Purchases

Purchase Return / Return Outward / Return to Supplier

Merchandise / Inventory / Goods

Buying any things for resale purpose is called merchandise/inventory/goods.

For example: Buying computers for resale purpose then computers are merchandise/inventory.

Drawings

The cash or goods taken/withdraw from business for personal use are called drawings.

For example: Mr. Aslam withdraws Rs. 400 for personal use.

Entity Concept

Entity concept means that business has separate entity from its owner or proprietor.

For example: The investment of the proprietor is the liability of the business.

Capital /Owner's Fund

A proprietor's money or things which is invested in business is called capital/ owner's fund.

For example: Aslam invest in business Rs. 200,000. In this transaction Rs. 200,000 is capital.

Proprietor / Owner

A person who invests the money or things in business is called is proprietor.

For example: Aslam invest in business Rs. 200,000. Aslam is proprietor/Owner.

Accounting Cycle / Bookkeeping Cycle

The accounting cycle is a serial series of activities to determine and record an entity's individual transactions, that aggregative at the end of period into money statements. The accounting cycle is basically the core redecoration activity that an accounting department engages in progress basis, and forms the premise for the money statements. Most accounting controls and procedures relate to the accounting cycle.

The following discussion breaks the accounting cycle into the treatment of individual transactions, so closing the books at the top of the accounting amount.

The accounting cycle for individual transactions is:

1. Identify the events of accounting dealing. Examples of such events are:

Buy materials

Pay wages to workers

Apply overhead to inventory and also the value of goods sold

Sell merchandise to customers

Provide services to customers