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Tuesday, August 11, 2009

Some Basic Terms of Double Entry System:

4. Drawings:
Money or value of goods belonging to business withdrawn by proprietor for his personal and domestic use is called drawing. It reduces the capital of the business.

5. Revenue:
Revenue is the sum of money received or to be received from the customers or clients of a business as a result of sale of them of goods or both. Income generated from the sale of goods, rent received, commission received etc. are some items of revenue. They are regular in nature.

6. Expenses:
Expenses include the cost of goods sold, amount paid for salary, rent, advertisement, insurance, wage etc. They are spent for generating future revenue. Expenses is the amount spent to produce and sell goods or services.

7. Debtors:
A person or an organization that owes money to the business mainly on account of credit sale of goods or rendering of services is a debtor. Debtors are current assets as they are expected to be collected within short period. When goods or services are sold on credit in the ordinary course of business, the customers are known as trade debtors.

8. Creditors:
The creditors are those persons or organizations to whom the amount are due. It is caused due to the credit purchase of goods or services. When goods or services are purchased on credit for the purpose of resale purpose the supplier or sellers are known as trade creditors.

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