Basic Accounting Terms | 2024-25 | Class 11 | Accountancy

Summary

In this educational video, the host continues to build on basic accounting terms introduced in a previous session. They explain key concepts such as capital and revenue receipts, expenditures, and the differences between them. The host also covers topics like income, profit, loss, and gain, providing examples for clarity. Further, they delve into purchase and sales terminology, the importance of understanding stock and inventory, and the role of debtors, creditors, and discounts in business transactions. The video aims to solidify viewers' grasp of foundational accounting principles, promising to progress towards practical applications in subsequent lessons.

Takeaways

• 📚 The video is an educational tutorial focused on basic accounting terms, aiming to build a strong foundation for students.
• 💼 The distinction between capital receipts and revenue receipts is clarified, with capital receipts being non-recurring and revenue receipts being recurring in nature.
• 🏦 Capital receipts can result from selling assets or taking loans, impacting either liabilities or assets, while revenue receipts are from regular business operations like sales, interest, rent, or commissions.
• 💡 Expenditures are categorized into revenue expenditure, capital expenditure, and deferred revenue expenditure, each with different recurrence and benefit periods.
• 🔑 The importance of understanding the difference between expenses and expenditures is highlighted, with expenses being a subset of expenditures related specifically to goods.
• 📈 The concept of income and profit is explained, with income derived from individual transactions and profit calculated from the total revenue and expense over a period.
• 🛒 Purchases and sales are discussed, along with the returns associated with them, emphasizing the flow of goods and money in business transactions.
• 📦 The terms 'goods', 'stock', and 'inventory' are defined, with distinctions made between opening stock, closing stock, and the components of inventory.
• 💵 Trade receivables and payables are explained, detailing the difference between debtors, creditors, bills receivable, and bills payable in the context of credit transactions.
• 📑 The role of a voucher as a transaction document is introduced, with a note that it will be covered in more detail in a future chapter.
• 💲 The script touches on discounts, rebates, and GST, explaining their functions in financial transactions and their impact on pricing.

Q & A

What are the two types of receipts mentioned in the script?

The two types of receipts mentioned are capital receipts and revenue receipts. Capital receipts are non-recurring and may result from selling assets or other one-time events, while revenue receipts are recurring and come from regular business activities like sales, interest, rent, or commissions.

How are capital receipts different from revenue receipts?

Capital receipts are non-recurring and typically result from significant transactions that do not happen daily, such as selling assets or obtaining loans. Revenue receipts, on the other hand, are recurring and are generated from the core operations of a business, such as sales of goods or services.

What is the difference between revenue expenditure and capital expenditure?

Revenue expenditure is recurring in nature and is necessary for the day-to-day operations of a business, like paying wages or rent. Capital expenditure is non-recurring and involves spending on long-term assets or investments, such as purchasing land or machinery.

Can you explain the term 'deferred revenue expenditure' as mentioned in the script?

Deferred revenue expenditure refers to expenses that are recurring in nature but provide benefits over a longer term. An example given is advertising, which is a regular expense but its benefits extend beyond the immediate period, thus it's not classified as a revenue expenditure nor a capital expenditure.

What is the main purpose of capital expenditure according to the script?

The main purpose of capital expenditure is to acquire assets that will generate benefits over a long period and increase the earning capacity of a business.

How does the script define 'expense' in the context of accounting?

In the script, 'expense' is defined as costs related to the production and selling of goods. It is a subset of 'expenditure', which is a broader term that includes all types of money going out of a business.

What is the relationship between revenue, expense, and income as explained in the script?

According to the script, income is calculated as revenue minus expense. Revenue is the money received from business activities, and expense is the cost associated with producing and selling goods. The difference between the two is the income from a single transaction.

Why is it important to understand the difference between income and profit as per the script?

The script emphasizes that income is derived from individual transactions and is a short-term concept, while profit is calculated from the total revenue and total expenses over a period, usually a year, and represents the overall financial performance of a business.

What are the two types of discounts discussed in the script?

The script discusses trade discount and cash discount. Trade discount is given on the MRP to all customers to increase sales, while cash discount is offered to customers who pay immediately in cash.

How does the script differentiate between a debtor and a creditor?

A debtor is someone to whom a business has sold goods or services on credit and is expected to receive payment, while a creditor is someone from whom a business has bought goods or services on credit and owes payment.

Outlines

00:00

💼 Introduction to Basic Accounting Terms

The speaker warmly welcomes the audience back to the channel and expresses enthusiasm for the new members joining the commerce community. They reflect on the previous day's lesson on basic accounting terms and the positive reception from the learners. The session aims to continue building on the foundational concepts, ensuring a comfortable pace for understanding. The focus is on capital receipts and revenue receipts, explaining the difference between recurring and non-recurring sources of income. Capital receipts are one-time events like selling assets, while revenue receipts are regular business transactions like sales, interest, or rent. The explanation is designed to be accessible, using simple language and relatable examples.

05:02

💸 Understanding Expenditures and Their Types

This segment delves into the concept of expenditures, which are the outflows of cash from a business. It contrasts revenue expenditures, which are regular and necessary for daily operations like wages or rent, with capital expenditures, which are non-recurring and long-term investments such as buying land or equipment. A third category, deferred revenue expenditures, is introduced for expenses that are recurring but provide long-term benefits, like advertising. The speaker uses relatable examples to clarify these distinctions and emphasizes the importance of understanding the nature of business expenses for accounting purposes.

10:02

📈 Accounting for Income, Profit, Loss, and Gain

The paragraph explains the financial outcomes of business activities, starting with income, which is the result of a single transaction—revenue minus expenses. It differentiates income from profit, which is calculated over a total period, such as a year. The concept of loss is introduced as a situation where total expenses exceed total revenue. Gain, on the other hand, is presented as a non-effort-based increase in asset value. The speaker also touches on the terms 'purchase' and 'sales', explaining how they relate to buying and selling goods, and introduces the idea of returns, both outward (purchase returns) and inward (sales returns).

15:02

📚 Stock, Inventory, and Financial Year Concepts

The speaker discusses the terms 'stock' and 'inventory', with stock referring to goods bought for resale and inventory being a more detailed account that includes raw materials, work in progress, finished goods, and stock in trade. The explanation includes the concepts of opening and closing stock, which represent the beginning and end of the financial year's stock levels. The paragraph also covers the financial year, emphasizing its importance in accounting and how it differs from the calendar year, ending on 31st March.

20:04

💳 Trade Receivables, Payables, and Voucher Basics

This section introduces trade receivables, which are amounts due from customers who have bought goods on credit, and distinguishes between debtors, who have no fixed payment schedule, and bills receivable, which have a definite payment date. The concept of trade payables is also explained, referring to amounts owed to suppliers from whom goods have been bought on credit. The paragraph further explains the difference between creditors, who are owed money without a fixed repayment schedule, and bills payable, which have a set repayment date. The term 'voucher' is briefly mentioned as a document that serves as proof of a transaction, with a promise to cover it in more detail in a future lesson.

25:04

🛒 Discounts, GST, and Additional Accounting Terms

The final paragraph covers the concept of discounts in sales, differentiating between trade discounts, which are given to all customers to boost sales, and cash discounts, which are offered for prompt payments. It also introduces the term 'rebate' as a form of discount but based on a fixed amount rather than a percentage. The paragraph briefly mentions GST, indicating that it will be discussed in more detail later. It concludes with definitions for 'entry' in accounting, which refers to recording transactions, and 'bag debt', which is money that cannot be recovered from a debtor. The terms 'insolvent' and 'solvent' are also explained, referring to a debtor's ability to pay. The paragraph ends with a brief mention of 'turnover', 'livestock', and 'investment', providing a broad overview of various accounting terms.

🏁 Conclusion and Encouragement for Further Learning

In the concluding paragraph, the speaker summarizes the chapter on basic accounting terms and encourages students to review the material carefully to strengthen their understanding of accounting. They express optimism about the students' progress and hint at upcoming practical lessons on topics like general entries. The speaker also invites engagement through likes and comments and extends an invitation to connect on Instagram. The session ends on a positive note, with a promise of more informative videos in the future.

Keywords

💡Capital Receipts

Capital receipts refer to the inflows of money that are not part of the regular business operations and are non-recurring in nature. In the video, it is mentioned that capital receipts can occur from selling assets like land or through taking a loan, which increases liability. These receipts are distinct from revenue receipts as they are not expected to happen on a daily basis and are tied to significant transactions or changes in the assets or liabilities of a business.

💡Revenue Receipts

Revenue receipts are the money inflows that are directly related to the core business operations and are recurring in nature. The video explains that these receipts are generated from activities such as selling goods, earning interest, or receiving rent, which are part of the regular business cycle. An example from the script is the receipt of money from the sale of goods, which is a daily occurrence in a business and thus classified as a revenue receipt.

💡Capital Expenditure

Capital expenditure, as discussed in the video, is the money spent on acquiring or improving fixed assets that benefit the business over the long term. It is a non-recurring expense and is recorded in the balance sheet. Examples include purchasing land, buildings, or machinery. The video emphasizes that capital expenditures are made to increase the earning capacity of the business and provide benefits over an extended period, unlike revenue expenditures.

💡Revenue Expenditure

Revenue expenditure is the money spent on day-to-day operations that are necessary for the business to function but do not add value to the business's assets. These are recurring expenses, such as paying salaries, rent, or electricity bills. The video script uses the example of paying wages, which is a regular expense that helps in the operation of the business but is not an investment in long-term assets.

💡Deferred Revenue Expenditure

Deferred revenue expenditure is an expense that is recurring in nature but provides benefits over a long term. It is a hybrid between revenue and capital expenditures. The video gives the example of advertising expenses, which are incurred regularly but their benefits are realized over an extended period. This type of expenditure is not immediately written off but is spread over the period of benefit, reflecting its long-term impact on the business.

💡Income

Income, as defined in the video, is the result of a single transaction or operation, calculated as revenue minus expenses. It represents the profit from a specific business activity or transaction. The video script explains that income is not the same as profit, which is derived from the total revenue and expenses over a period. Income is a narrower concept, focusing on individual transactions, whereas profit considers the overall financial performance of a business.

💡Profit

Profit in the video is described as the financial gain derived from the overall operations of a business, calculated as total revenue minus total expenses. It is a broader measure than income, as it encompasses all the financial activities of a business over a specified period, typically a year. The video script mentions that profit is the result of hard work and business operations, and it is an indicator of the business's overall financial health.

💡Purchase

A purchase, as mentioned in the video, refers to the acquisition of goods for resale in the normal course of business. It is a crucial part of the trading process, where a trader buys goods with the intention of selling them at a profit. The video script uses the example of a cloth merchant buying cloth, which is a purchase, and then selling it, which would be considered sales. Purchases are essential for maintaining inventory and fulfilling customer demands.

💡Sales

Sales are the transactions where goods or services are sold by a business to customers in exchange for money. The video script explains that sales are the lifeblood of a business, generating revenue that supports the business's operations and growth. It is the act of selling goods that the business has bought or produced, aiming to make a profit. The video also touches on sales returns, which occur when goods sold are returned by customers, impacting the total sales figure.

💡Stock

Stock, according to the video, refers to the goods that a business has on hand for resale. It includes both the goods purchased for selling and the unsold inventory. The video script differentiates between opening stock, which is the stock available at the beginning of the financial year, and closing stock, which is the remaining stock at the year's end. Understanding stock levels is vital for businesses to manage inventory effectively and plan for future purchases.

💡Inventory

Inventory in the video is defined as a detailed record of all the goods a business holds for sale, including raw materials, work in progress, finished goods, and stock in trade. It is a more comprehensive term than stock, as it includes not only the finished goods ready for sale but also the components and materials used in the production process. The video script explains that inventory management is critical for businesses to ensure they have the right amount of goods to meet demand without incurring excessive storage costs.

Highlights

Introduction to basic accounting terms and the importance of understanding them for commerce students.

Emphasis on the growth of the commerce community with new members and the commitment to educational progress.

The plan to cover more accounting terms and the intention to complete the chapter in the current or next session.

Explanation of the importance of a comfortable pace in learning, avoiding haste.

Definition and differentiation between capital receipts and revenue receipts, including examples.

Discussion on the nature of recurring and non-recurring receipts in the context of business operations.

Clarification on the sources and characteristics of revenue and capital receipts.

Introduction to the concepts of revenue expenditure and capital expenditure, with examples.

Explanation of the difference between revenue and capital expenditures in terms of recurrence and long-term benefits.

Introduction of the term 'deferred revenue expenditure' and its characteristics.

Differentiation between capital and revenue expenditures in terms of asset acquisition and earning capacity.

Understanding the terms 'expense' and 'expenditure' in the context of business transactions.

Definition and calculation of income as revenue minus expense, emphasizing its relation to individual transactions.

Explanation of profit as the result of total revenue minus total expenses, contrasting it with income.

Clarification on the concept of gain as a type of benefit that is not necessarily earned through hard work.

Discussion on the terms 'purchase' and 'sales' in the context of buying and selling goods.

Explanation of 'purchase return' and 'sales return' as part of business transactions.

Introduction to the terms 'goods' and 'stock', including the concept of opening and closing stock.

Definition of 'inventory' and its components, such as raw materials, work in progress, and finished goods.

Understanding the terms 'debtors', 'bills receivable', and 'trade receivables' in the context of credit sales.

Differentiation between 'trade payables' and 'trade receivables', including the roles of creditors and debtors.

Introduction to the concept of a 'voucher' as a document for recording transactions.

Explanation of 'discount' in sales, including the types of trade discount and cash discount.

Introduction to 'rebate' as a form of discount, differentiated by amount rather than percentage.

Brief mention of GST and its implications for accounting, to be discussed in later sessions.

Definition of 'entry' in accounting as the recording of transactions in books.

Explanation of 'bag debt' as irrecoverable amounts from debtors and the concept of 'insolvent'.

Introduction to the term 'turnover' as a measure of sales in a business.

Definition of 'livestock' in the context of animals used in business operations.

Final discussion on 'investment', including the deployment of funds in shares or debentures.

Conclusion of the accounting terms chapter and encouragement for students to review the material.

Transcripts

What's up everyone, welcome back to the channel.

Guys, we started basic accounting term yesterday.

And I taught you some terms.

You understood those terms very well.

Learned very well and appreciated a lot.

I felt very good that in our commerce family A lot of new young bloods have

joined.

And now we will take this caravan forward.

And we will do a lot of hard work.

Our journey of these two years.

Then after that, your graduation, competitive exams.

We will make you do a lot.

Today we will take the basic accounting terms further.

I will teach you some more terms.

I will try to finish the chapter.

If not, then we will put one more video.

But in basics, we will always keep in mind That you have to walk comfortably.

Don't do it fast, son.

The chapter that is going to be done soon, I will do it soon.

We will take time on what we have to take time.

But we will do it easily.

So let's start quickly.

Let's see a few more terms today.

Let's move things forward.

Let's go quickly.

Let's begin.

Intro Let's start

with today's first term.

Which is capital receipts and revenue receipts.

Now the definition written here is a bit technical.

So you don't read this definition.

You understand the meaning mainly.

See what are the receipts first?

Receipts are when you get money from any source.

That is a receipt for you.

It's a simple thing, brother.

I have money coming to me.

So I have a receipt.

Now it may also be that the money has been sold.

It may also be that I have sold my asset.

May have come from there.

It may also be that I have won a lottery.

So the receipt can be from any source.

We got interest, rent, commission.

Can get anything.

And it may also be that goods have been sold.

Have done sales.

So whenever you get a receipt.

It can be of two ways.

Either it will be a revenue receipt.

Or it will be a capital receipt.

Now to understand this a little.

Use the note.

That either it will be a revenue receipt.

Or it will be a capital receipt.

Now first of all understand this.

The revenue receipts are of recurring nature.

Recurring means that you will keep happening on a daily basis in business.

Like goods were sold, sales were done and money came.

It is a revenue receipt.

The capital receipts are of non-recurring nature.

Non-recurring means that it is going to happen sometimes.

Which are not on a daily basis.

Like I sold my land and money came to me.

So either it will be that I have received a receipt.

Which is going to happen on a daily basis.

Like what happens in your business.

Some interest is coming.

Some rent is coming.

Sales are happening.

Goods are being sold.

So these are basically of my revenue nature.

So we call them revenue receipts.

But if I have taken a loan.

I will not take a loan every day.

I have received a receipt by selling some land.

I sold my furniture.

I sold my building.

I sold that.

This will not happen every day.

So these are of non-recurring nature.

That's why they are called capital receipts.

So if someone asks you now.

Sir, what is a capital receipt?

So we will say that these are the sources of receipts.

Which are of non-recurring nature.

Which are going to happen sometimes.

And either they are due to reducing our assets.

Or it is due to increasing liability.

Like I took a loan.

Receipt has increased liability.

Or I reduced some asset.

So that happened.

So these are all capital receipts.

What are revenue receipts?

These are the sources of receipts.

Which are of recurring nature.

Which are going to happen on a daily basis.

Which are from the main operation of the business.

Sale of goods.

Interest received.

Rent received.

Commission received.

All this.

So this is the basic difference.

Between revenue receipts.

And capital receipts.

Okay children.

After this what is coming to us?

Expenditures.

Such are the expenses.

Such are the expenses we have children.

This is also the same.

Revenue expenditure.

And capital expenditure.

Now what does expenditure mean?

Money is going out of your pocket.

What happened in receipts?

Money came in your pocket.

Money will go out of your pocket in expenditure.

Okay.

So if there is any such expense.

Which is again of recurring nature.

Is going to happen on a daily basis.

You are paying some rent.

You are paying some advertisement.

You are paying some wages.

You are paying salaries.

Which is important in the functioning of your normal business.

You are paying electricity bill.

You are buying fuel.

All expenses are happening.

So all these expenses are of recurring nature.

Have to do it again and again.

Have to do it on a daily basis.

And it is important for the functioning of your business.

So what do we call such expenses?

Revenue expenditures.

What will be called such expenses?

Revenue expenditures.

What will be the capital expenditures?

Again these will be those expenditures.

Or those outflow of cash.

Which will be non-recurring.

Which are not happening every day.

You are buying some asset in them.

You bought some land.

You bought some building.

You bought some property.

You bought some furniture.

Any such expenditure.

In which you have to do sometimes.

Whose benefit you will get for a very long time.

Which will give you some asset.

Such expenditures are called capital expenditures.

These are non-recurring.

These are recurring.

I guess you must have understood this very well.

The benefit of revenue expenditures is also short term.

The benefit of capital expenditures is also long term.

There is one more third expenditure.

Which is the combination of these two.

It is called deferred revenue expenditure.

Now sir, what is deferred revenue expenditure?

Look, deferred revenue expenditure is there.

Which will have to be done again and again.

Means it will be of recurring nature.

But its benefit will be long term.

Benefit is of this.

So both have characteristics.

Means it will have to be done again and again.

It will also be recurring.

But the benefit is long term.

Sir, give an example of this.

The example of this is advertisement.

Whenever you do any advertisement.

Then advertisement has to be done.

Big companies do ads.

And that ad benefits them for a long time.

So neither is it revenue expenditure.

Nor is it capital expenditure.

That is deferred revenue expenditure.

What does deferred revenue mean?

Deferred means to extend.

Extended for a long time.

So any revenue expenditure.

Which extends for a long time.

It is called deferred revenue expenditure.

Its best example is advertisement.

So revenue expenditure is your salary, wages, interest.

Capital expenditure.

When you are buying any asset.

Purchase of land, building, furniture, machinery.

Deferred revenue expenditure will be your advertisement.

Okay kids.

Very good.

He also understood.

Take a screenshot of this too.

Okay.

The next terms are coming.

A difference has been given.

Capital expenditure in revenue expenditure.

Now see, I will also teach you once.

Although I have told you everything.

From capital expenditure.

You will mainly do acquisition.

That is, you will purchase an asset.

Okay.

Capital expenditure increases your earning capacity.

After that, capital expenditure.

Gives you a benefit in a long period.

Capital expenditure is written in the balance sheet.

Now sir, what is the balance sheet?

You can only remember this point for now.

When I will teach you the balance sheet in the coming chapters.

Then you will understand this.

Okay.

Ignore for now.

After that, if I talk about revenue.

Then revenue expenditure is for day to day running.

The benefit of revenue expenditure is maximum of 1 year.

Revenue expenditure helps you run assets.

Okay.

Like you bought machinery.

Capital expenditure.

The oil that will be added in it.

Revenue expenditure.

Okay.

And this is shown in P&L account.

If I tell you this from now.

Ignore for once now.

Because you will learn later.

What is the balance sheet?

And what is the trading and profit and loss account?

Okay.

Done sir.

After this, children, what are the expenses?

Sir, is expenditure and expense the same thing?

See, if I speak in layman language.

If I speak in the language of a common man.

Then there are expenses.

But accounting has differentiated it a little differently.

Expense is a small term.

Expenditure is a big term.

Everything came in expenditure.

Expense is only related to goods.

If you have spent on production and selling.

That goods have been made and goods have been sold.

Goods means on which I deal.

If I am a cloth merchant.

Then cloth is my good.

If I sell furniture.

Then furniture is my good.

If I sell utensils.

Then utensil is my good.

So the thing in which you deal.

It is called goods.

So in the production of goods.

In the selling of goods.

If any expense is coming children.

Then it has to be called expense.

Everything came in expenditure.

Selling expenses.

Administrative expenses.

Distribution expenses.

All of them.

Expenditure is a very big term.

Expense is a small child of it.

Okay.

This is expense.

After that, sir, what is income?

What is income?

So income is child.

Revenue minus expense.

What you earned.

Revenue means whatever money came to you.

Minus whatever money went from you.

So revenue minus expense is your income.

Sir, this is not a profit.

No children.

This is of a single transaction.

How much came from one transaction.

Minus how much was spent.

What is left is my income.

Now if I do total revenue.

Add all the revenues of the whole year.

Total revenue minus total expense.

Minus all the expenses of the whole year.

So total revenue minus total expense is profit.

What is the difference between the two?

Income will come from individual transaction.

Profit will come from totality.

Okay.

This is our income.

Write this too.

Okay.

After this, what is our profit?

I have already told you the profit.

Total revenue minus total expense.

This will be profit.

What will be the loss?

If the expense is more.

And the profit is less.

So if your total expense is more.

Total revenue is less.

Then loss will come in that scenario.

What is gain?

Gain is any kind of benefit.

Okay.

You will get a lottery in your business.

Gain is different from profit.

Profit will have to earn by hard work.

Gain normally happens to you.

That you bought an asset of 1 lakh.

Today its value has increased so much.

That it is selling for 10-20 lakhs.

So it is gaining.

You are not working hard in it.

Automatically increased.

So that is gain for you.

Okay.

After this, kids purchase.

Who is purchase called?

See kids purchase.

We use it for goods.

Sir goods means.

In any particular thing.

I deal.

Like I just told you.

If I am a cloth merchant.

So cloth is goods for me.

So if I buy them.

Then I will call it purchases.

If I am selling it.

Then I will call it sales.

This means.

In any thing I deal.

If I buy it.

Then I call it purchases.

If I sell it.

Then I call it sales.

Okay.

Suppose I am a shoe manufacturer.

I buy shoes and sell.

I am not a manufacturer.

I am a trader.

I am a trader.

I buy shoes and sell.

So if I am buying shoes.

They are purchases for me.

If I sell it.

They are sales for me.

Now kids.

Many times it happens.

That whatever goods we have bought.

Some defective came out of it.

Or the tooth broke on the way.

Or the color I liked.

It did not come.

So I have to return it too.

So if I will return.

It is called.

Purchase return.

The goods purchased.

It did not turn out right.

I will return it.

So that is.

Purchase return.

Now see money.

Sorry.

Goods are going out of me.

Outward flow is happening.

So that is why it is called.

Return outward too.

So either return outward.

Or purchase return.

Whenever you return the purchased goods.

Okay.

Similarly.

The goods I am selling.

It is called sales.

Many times the sold goods.

Comes back too.

Like you have the right.

That you bought things.

Did not like it.

So you can return it.

Similarly.

The other person also has the right.

That if he has sold something.

Okay.

You have sold something.

And the other person did not like it.

So he can also return it.

So this time you have.

Inward supply is coming.

The goods are coming back from outside.

So what is this called?

Return inward.

Or sales return.

So return inward.

Or what does sales return mean?

Some customers.

Might return the goods sold.

These are termed as.

Return inward.

Or sales return.

So understood the purchase.

Understood the purchase return.

Understood the sale.

Understood the sales return.

Okay.

What is next kids?

Goods.

Goods I told you.

All those things.

Which you have bought.

For resale.

So you call it goods.

What is stock?

Now see kids.

Stock is.

Which particular.

Value of goods.

Which you have taken for resale.

And along with that.

Which you also have left.

This means.

That in stock.

You have a lot of things.

Number one is.

The goods you have bought.

To sell.

Number two is.

Which you already have left.

Unsold you have left.

So in the beginning of the year.

See you will start a business.

For example.

I am starting a business on 1st of April.

I am starting a business on 1st of April.

1st April 2024.

Okay.

So now full April.

Full May.

Full June.

Full July.

August.

September.

October.

November.

December.

Sir year ends.

No kids.

In accounts.

Year does not end in December.

In accounts.

January.

February.

And March.

Our year will end.

That year will end.

31st March 2025.

This year.

Which starts in April.

And ends in March.

This is called financial year.

So your classes.

Which you have studied.

That is also according to the financial year.

Then you are told.

Son you are session 2425.

Why is it called 2425?

Because your start is in April 24.

And when will you go in 12th?

In March 25.

Are you understanding?

That's why we call it financial year.

Okay.

So now in the beginning of the year.

As much as you had stock.

In the beginning of the year.

From which your business has started.

It is called opening stock.

In the middle of the year.

Many times you will buy.

Many times you will sell.

Many times it will come back.

Many times you will return.

So what is left at the end of the year.

You call it closing stock.

So with which stock.

You start your year.

That is the opening stock.

And with which stock.

You do the ending of your year.

That is the closing stock.

It may also happen that all your stuff is sold.

Till the end of the year.

So you don't have a closing stock.

This also happens with many businesses.

Okay.

So understood financial year.

Understood opening and closing stock.

After stock.

It has a big brother.

Which is called inventory.

Sir, what is inventory?

Inventory is a detailed explanation of stock.

It says that.

Inventory is also a kind of stock.

In common language.

So inventory is also a stock.

But some things are extra in it.

Like.

First of all raw material.

Raw material means raw material.

For example.

I make sugar, son.

So what is the raw material I have?

Sugarcane.

I have sugarcane.

So I will have an inventory of raw material.

Then I will have an inventory of work in progress.

Work in progress means.

The work that has started.

But it is not complete yet.

It is in the middle.

Like I made sugarcane juice from sugarcane.

So the sugarcane that is left with me.

That has become my raw material.

Sugarcane.

What did I do with it?

I took out sugarcane juice first.

So the sugarcane juice that I have.

That has become work in progress.

Finished goods.

Which is ready with me.

Which is ready to be made.

I have that.

Readymade sugar.

What is ready to be made.

Its material is left.

And what is the meaning of stock in trade?

Stock in trade is.

What you bought from outside.

I am making something.

I bought something from outside.

Purchased sugar.

Suppose I sell two brands.

One is mine.

I bring one made.

So four things will come in the inventory.

Which four things will come?

First of all.

Inventory of raw material.

Which is raw material.

Plus.

Inventory of work in progress.

Which is being made now.

Is in the middle.

Plus.

Inventory of finished goods.

Finished means.

Which is ready to be made.

Is not yet sold.

Plus.

Inventory of stock in trade.

Which was made.

Bought.

To sell.

That material is left.

So whatever material I have.

Is of raw material.

Plus.

Is of work in progress.

Plus.

Is of stock in trade.

Plus.

Is of finished goods.

If you add all four.

Inventory is made.

So inventory is also stock.

Just in this.

Bifurcation has been done.

Ok.

You can also take a screenshot of this.

Son.

Let's go.

Sir.

We also understood this.

After this.

Son is coming.

We have some small terms.

And.

Like debtors.

Bills receivable.

Trade receivables.

So sir.

What are debtors?

What are bills receivables?

What are trade receivables?

Look.

It is very simple.

Son.

Start with trade receivables.

It is in the name.

Trade and receivables.

Trade means.

Receivables means.

From whom to take money.

So.

In your business.

There are some people.

From whom we have to take money.

We call them trade receivables.

Ok.

Now.

Who are these people?

From whom to take money.

Son.

These are the people.

To whom we have sold goods in debt.

Because in business.

Cash also runs.

In business.

Credit also runs.

So.

Credit means debt.

There are two meanings of credit.

One.

Right hand side of the account.

That is also credit.

And.

One.

Debt.

Debt.

We also call debts as credit.

So.

Who have you sold goods in debt.

You call them trade receivables.

Ok.

So.

Trade receivables.

What are they?

Trade receivable refers to the amount receivable.

On account.

Sale of goods.

Either you have sold goods.

Or any services.

So you have to take money from them.

They are trade receivables.

Ok.

Now.

The trade receivables.

Son.

It has two categories.

Trade receivables.

How many ways are there.

Two ways.

No.

1 is debtor, No.

2 is BR, bills receivable.

Now many students read debtor.

So remember kids, debtor is nothing.

This is debtor.

The B word is silent.

So you will never read debtor, debtor.

This is debtor.

So who is debtor?

Debtor are those people.

The term debtor represents all those persons or all those firms to whom we have

given goods or services on loan.

On credit.

And we haven't received the payment yet.

So this is what we call debtor.

Sir, this was the meaning of trade receivables.

Absolutely son.

Trade receivables have only two parts.

Trade receivable means all those people from whom we have to take money.

Some are called debtor.

Some are called bills receivable.

What is bills receivable now?

Look, these are the people from whom we have to take money.

Now what do some people do?

Some people write to us that brother, take this money after 2 months.

Take this money after 3 months.

So we say that he is not a debtor.

Because the debtor is the one who does not know when he will give.

No one knows him.

Maybe he would have given it tomorrow.

Maybe he would have given it day after tomorrow.

Maybe he would have given it after a month.

Bill receivable wrote and gave it to you.

Gave you a date.

Take it after 2 months.

So those are bills receivables.

So there are two categories of trade receivables.

One is those who do not know when they will give.

They have indefinite time.

One is those who will give with definite time.

These are bills receivables.

A bill of exchange becomes bill receivable for the purpose, for the person who

draws it and gets it back after its acceptance from the drawing.

Acceptance means suppose I have to take money from you.

I wrote you a bill and gave it to you.

You signed it and gave it to me.

That okay, take it after 2 months.

It is a legal document, kids.

We call it BR.

Okay.

Now as trade is receivable, similarly trade payable is also there.

Sir, what is trade payable?

Trade payable means those people to whom we have to give money.

Like we had to take money from trade receivables, similarly we have to give

money for trade payable.

Sir, giving means have we bought goods on loan from them?

Yes.

These are also of two types, creditors and BP.

These are also of two types, creditors and BP.

So trade payable is the amount payable on account of goods purchased and

services taken.

Who is a creditor?

Creditors are those people to whom I have to give money.

I don't know when I will give.

It is an indefinite period.

When there will be money, I will give.

So he is my creditor.

If I give him by writing that take your money after 2 months.

Signed and gave.

Signed and gave.

Fixed the time period.

Now these bills are payable for me.

So what are bills payable?

Bill of exchange becomes bill payable for the purpose who accepted it.

The person who accepted for the person.

Of course.

The person who accepted and gave it to the drawer.

Who is the drawer?

Bill writer.

So in trade payables, mainly you remember the creditor.

The creditor is the one with whom goods are purchased.

His money has to be given.

Debtor is the one with whom goods are sold.

Have to take money from him.

Debtor creditor is very important.

Please write in Hindi in your copy.

Have to take money from debtor.

Have to give money to creditor.

What is a voucher?

Voucher is nothing.

Voucher is a document.

It is a proof of any transaction.

We do general entries on the basis of voucher.

I will teach you voucher in chapter no.

8.

We will read a source document chapter.

We will read in detail in that.

For now, you skip the voucher.

For now, you skip the voucher.

Okay.

What is after this?

After this, we have discount.

You understand everything about discount.

Whenever you go to sell any goods, many times your customer says brother, do

something or the other off.

Give some or the other leave.

Reduce some or the other price.

It is called a discount.

Whenever you go to buy, then you tell the seller, brother, do something off.

Reduce something.

Give some discount.

So what is discount?

Discount is either an allowance.

Allowance means benefit.

Offered by the seller of the goods.

The seller gives that out of the selling price.

Isn't it?

Suppose the MRP of jeans is 1000.

It is written 10% off.

Will be less than 100.

It is called a discount.

Discount is of two types.

What are the two types?

Trade discount and cash discount.

Trade discount is given on MRP.

It is given to all customers.

That brother, come.

This is to increase the sale.

Cash discount is only for those customers who will pay cash immediately.

Now children in business, a lot of creditors also come.

Who are the creditors?

Who have come that son, we have come to buy goods on credit.

Will give money after 3 months.

Now if you sell on credit, then there is a chance of money dying.

So we say, don't take it on credit.

We will give you less than 20 rupees.

Come on, less than 20 rupees.

So what is this discount?

It is a cash discount.

So there are two discounts.

Trade discount, which you are normally giving to everyone to increase the sale.

Cash discount will only be given to those people who will pay in cash.

So this is the difference between trade discount and cash discount.

Prompt payment means early payment.

After this comes rebate.

There is not much difference between rebate and discount.

This is also a kind of discount.

Rebate is in the amount.

Discount is in the percentage.

This is the basic difference.

After this, we came to GST. We will talk about GST later.

Then there are some other small terms.

Like number 1 entry.

What is entry?

When you record any transaction in books, it is called entry.

We will read this in journal entry.

What is entry?

If you record any transaction, then it is entry.

Bag debts.

Bag debt means, you had to take money from a debtor and he took it and ran

away.

Or he refused that I don't have money.

His wall came out.

Right.

After that, there is no money.

He took your money and ran away.

Loss occurred.

It is called bag debt.

The amount that has become irrecoverable from a debtor.

The amount you will not get now.

It is called bag debt.

Insolvent.

The person's wall came out who is not in the capacity to pay.

He is insolvent.

Solvent, who is in this capacity to give your money.

So solvent is that who can give your money.

Insolvent can be that who will not be able to give your money.

Now it is over.

Right.

His wall has come out.

After that, we have some small terms.

Like turnover.

What is turnover called?

It is called sales.

It is said that that person has so much turnover.

Turnover is sales.

What is livestock?

If any animals are being used in the business.

Like in many businesses, there are camels.

There are buffalos.

There are horses.

So if in your business, any animals are being used, then you call it livestock.

The last is investment.

What is investment?

When you invest your money in any business or you invest your money in any

fund, people buy shares.

Right.

What is shares?

You have invested money in any company.

You bought any asset.

So whenever you buy any asset, you invest your money, it is called investment.

What is investment?

The deployment of funds.

Deployment means transfer of funds in the shares or debentures of a company.

Shares means you bought a share of that company.

Debenture means you gave a loan to that company.

In a way, it will return it to you.

So this loan that you have given, you have bought ownership.

Okay.

These kids are basically investments.

So this was the basic accounting terms.

Our chapter is finally over.

What you have to do simply, you have to watch both the videos again.

Watch the first part and today's part very carefully.

Understand it very carefully and make your accounting strong.

My child, when you will do so many things, then we will move towards practical.

In which we will learn general entries etc.

So your accounting will be absolutely best.

Okay.

So that's all for today.

If you like this video, then do like it.

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It will be fun.

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I'm gonna see you all super soon.

Till then see ya.

Take care.

Bye-bye.