MGT101 Short Notes 3

MGT211 Short Notes · Introduction · 1. Define business.

Answer: Any legal activity undertaken for the purpose of earning profit is called business.

Q2. What are different classes of business?

Answer: (I) Trading (ii) Manufacturing (iii) Servicing

3. Define manufacturing.

Answer: A business in which goods are purchased and resold after some modification is called manufacturing. For example; Sugar mills and Textile Mills.

4. Define Servicing.

Answer: A business in which services are purchased and sold is called servicing. For example, services of Doctor and lawyer etc.

5. Define Trader.

Answer: A person who performs trading is called trader. For example: wholesaler, retailer.

6. Define manufacturer.

Answer: A person who performs manufacturing is called manufacturer. For example, sugar producer, cloth producer. Or A person who converts raw material into finish goods is called manufacturer.

. account

An accounting record in which the results of transactions are accumulated; shows increases, decreases, and a balance.

. account payable

An amount owed to a supplier for good or services purchased on credit; payment is due within a short time period, usually 30 days or less.

. account receivable

A current asset representing money due for services performed or merchandise sold on credit.

. account receivable turnover

A measure used to determine a company's average collection period for receivables; computed by dividing net sales (or net credit sales) by average accounts receivable.

A service activity designed to accumulate, measure, and communicate financial information about economic entities for decision-making purposes.

. accounting cycle

The procedures for analyzing, recording, classifying, summarizing, and reporting the transactions of a business.

. accounting model

The basic accounting assumptions, concepts, principles, and procedures that determine the manner of recording, measuring, and reporting an entity's transactions.

. accounting system

The set of manual and computerized procedures and controls that provide for identifying relevant transactions or events; preparing accurate source documents, entering data into the accounting records accurately, processing transactionsaccurately, updating master files properly, and generating accurate documents and reports.

. accrual basis

Gross income is recognized when earned.

. accrual-basis accounting

A system of accounting in which revenues and expenses are recorded as they are earned and incurred, not necessarily when cash is received or paid.

. accrued expenses

Expenses that arise through adjusting entries when accounting for unrecorded expenses.

. accrued liabilities

Liabilities that arise through adjusting entries when accounting for unrecorded liabilities

7. Define Transaction/ business transaction.

Answer: Any activity which changes (effects) the financial position of a business is called transaction / business transaction. For example, good purchased from Ali, Salary paid to employee.

8. Define cash transaction.

Answer: A transaction in which cash flows (paid or received) is called cash transaction. For example, goods sold for cash.

9. Define credit transaction.

Answer: A transaction in which cash does not flow (neither paid nor receive) is called credit transaction. For example, Goods sold on credit to Ali.

Q10. Who is proprietor / owner?

Answer: A person who invests money or things is a business is called proprietor. Proprietor bears loss or earns profit in the business. The term