FUNDAMENTALS OF

ACCOUNTING
LECTURE NO.2
Business
A business entity is an organization that uses economic
resources to provide goods or services to customers in
exchange for money or other goods and services.
Types of Business
■ Merchandising Business
■ Manufacturing Business
■ Service Business
■ Hybrid Business
Forms of Business Organization
■ Sole Proprietorship
■ Partnership
■ Corporation
 ACCOUNTING
Accounting may be defined as “A Systematic recording
of information which involves analyzing, classifying,
summarizing and interpreting business transaction.”
Heads of Accounting
■ Capital
■ Assets
■ Liabilities
■ Expense
■ Revenue
Capital / Owner’s Equity
It represents the owner’s claim to the assets of the
business.

OR

It is the account of proprietor / Partner who

invested money in the business.
Assets
Assets are economic resources that are owned by a
business & expected to benefit future operations.
There are two types of assets:
1. Current Asset
2. Fixed or Plant Asset
Current Asset
These are those assets which are expected to be
realized in cash or sold or consumed within a
year through normal operation of the business.
Fixed Asset

Those assets which can be utilized more than a

year or converted into cash after a year.
Liabilities

Liabilities are debts, it represents creditor’s

claim on the firm’s assets.
1. Current Liabilities
The liabilities which are paid within a year.

2. Long-term Liabilities
The liabilities which take several years for payment.
Expenses
Expenses are outflow or using up of assets as a
result of business operations.
Revenues
Revenues are inflow of assets received in
exchange for goods or services, provided to the
customer as a part of business operations.
TITLE OF ACCOUNTS
ASSETS:
a. Tangible Assets
1. Current Asset
2. Fixed Asset
b. Intangible Assets
Current Assets:
• Cash (in hand)
• Bank (Cash at bank)
• Account Receivable
• Prepaid Expenses (Advance)
• Supplies
• Merchandise Inventory/ Goods/ Stock
• Marketable Securities