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LECTURE 1
Accounting is an art or science of recording , classifying, summarising and interpreting the
business transactions in terms of monetary value or money.
From the data recorded, people skilled in accounting should be able to infer whether the
businesss financial performance is up to the mark or not. Plus they would use this data to
ascertain the strengths and weaknesses of the business.
The part of accounting concerned with recording down data is called Book keeping. Almost a
century ago, all of the data was recorded manually, thus the word book keeping.
Before we can move on, lets talk about types of businesses.
In lay mans language, a business is any legal activity done in order to earn money.
Business can be classified into several types with respect to the owners.
1. Sole Proprietor: Single owner e.g Hotels, Private shops, etc
Features:
Unlimited liability
E.g a a sole proprietor Mr.Daniyal invests $400 into
his business and suffers a loss of $800. This means
the proprietor has to bear all of the loss alone.
2.
Partnership/Firm:
2-20 parties involved or 2-10 partners present in banking e.g
construction firms.
Features:
unlimited liability
Company/Corporation
where many people own the company(shares
involved) e.g multinational companies; Nestle,etc
Features:
limited liability
Share holders only share the amount of loss which
they have invested. That is to say, if you have $5000
worth of shares, you can not loose more than $5000
if the company is in loss.
There are two types of companies :
1. Public limited company
2. Private limited company
The features of the two types of companies form a later portion of your syllabus so they
will be discussed later.
3.