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Accounting for Companies – II

notes in any trade or buy or sell or barter goods for others otherwise than in connection with bills
of exchange.

l z Immovable property, except that required for its own use, however acquired, must be
disposed of within seven years from the date of acquisition.

l z However, any company which is engaged in the manufacturer of goods or carries on
any trade and which accepts deposits of money from the public merely for the purpose
of financing its business as manufacturer or trader shall not be deemed to transact the
business of banking.
l z It may be mentioned that the Banking Regulation Act, 1949 is not applicable to a primary
agricultural society, a cooperative land mortgage bank and any other co-operative society
except in the manner and to the extent specified in Part V of the Act.

7.6 keywords

Annuity: A series of receipts or payments of a fixed amount for a specified number of years.
Alternatively, a pattern of cash flows that is equal in each year, i.e. equal annual cash flows.
Asset: Anything which enables the firm to get cash or some benefit in future, is an asset which
include fixed asset, current assets.

Balance Sheet: Statement of assets and liabilities at a specific date. This is part of final accounts
of a Firm.
Bonus Shares: Dividend paid in form of equity shares and not in cash.

Book Value: The value of an asset, a liability or equity, as recorded in the accounts of a firm. The
book value of an ordinary share is equal to the paid up capital plus retained earnings i.e. net
worth.

Capital: The amount that the promoter invests in the business, which he can claim from the
business, as it is liability of the business and asset for the promoter. It can be called net worth or
owner’s equity.
Credit Period: The time given to a buyer to make full payment for credit purchases beyond the
expiry of which the payment becomes outstanding.
Creditors: The persons to whom the money is owing by the firm, when goods are purchased by
the firm on credit.
Debtors: The persons who owe money to the firm to whom the goods have been sold by the firm
on credit.

Income Statement: It presents the net income of a firm for a period of time (say a quarter of
year).
Revenue: It is the result of operations and increases the inflow of assets and also the increase in
owner’s equity, if the net result is profit.

7.7 review Questions

1. Explain the accounting equation concept.
2. Discuss the rules for Debit and Credit of all three accounts.

3. Salaries paid during the year 2006-07 amounted to ` 15000 which included ` 1500 in respect
of 2005-06 and ` 500 in respect of 2007-08. In 2005-06, ` 700 was paid as advance salary for
2006-07. Salaries for 2006-07, amounting to ` 1,200 remained outstanding on 31st March,
2007. Calculate the salaries expenses for the year 2006-07.

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